UK economy: ‘Worst is behind us’ as optimism among finance bosses rises again
Optimism among CFOs at the UK’s largest firms increased for the third consecutive quarter as the UK economy’s rosier economic prospects filtered through into corporate confidence.
With inflation falling fast and interest rates likely to be cut in a matter of months, CFOs are much more confident about their business prospects than is normally the case.
A net 17 per cent of CFOs are more positive about the financial prospects for their business than they were three months ago, according to a Deloitte survey. The average level of optimism over the 16-year history of the survey is a net -1 per cent.
Uncertainty also fell to its lowest level since summer 2021, when lockdown restrictions were coming to an end.
“Optimism among the UK’s largest businesses is running at well above average levels, suggesting that the worst of the economic downturn is behind us, with current sentiment at levels that preceded periods of good growth in 2010, 2014 and 2021,” Ian Stewart, chief economist at Deloitte said.
“For the first time in three years, CFOs expect margins to increase over the next 12 months,” he added.
64 CFOs participated in the latest quarterly survey, including finance bosses at eight FTSE 100 companies and 23 FTSE 250 firms.
The survey showed that fears about inflation are receding. Finance chiefs now expect inflation to be 2.9 per cent in a year’s time, down from 3.5 per cent last quarter.
The findings reflect the UK’s positive start to the year so far, with the economy returning to growth in January and business surveys indicating a “robust” expansion in February and March.
However, the survey showed that geopolitics is the most likely factor to disrupt this rosier outlook about the UK economy, the third time in a row fears about geopolitics have been top of CFOs’ minds.
51 per cent of CFOs expect the level of geopolitical risk to increase over the next three years with just three per cent expected risks to diminish.
Specifically, they were most worried about the possibility that geopolitical developments could trigger cyber-attacks, with a knock on effect on the health of the UK economy.
“While CFOs are more optimistic about the general outlook, and uncertainty has decreased, that does not apply to geopolitics,” Stewart said.