UK finance chiefs gear up for growth as sentiment soars
Chief financial officers of some of the largest UK companies have seen expectations about the prospects of their own businesses shoot up following the election, with uncertainty falling to its lowest level in over eight years.
Sentiment among CFOs rose for the fourth consecutive quarter in Deloitte’s latest CFO survey, with a net 23 per cent being more positive about the financial prospects of their businesses than three months ago.
“We’ve seen a significant shift in risk appetite post the general election and the new government’s focus on growth and stability is already increasing corporate confidence,” said Richard Houston, senior partner and chief executive of Deloitte UK.
“Business leaders want industrial strategy to be top of the new government’s economic priorities, and there’s a clear desire to work in partnership to unlock growth and drive productivity. This will be critical to delivering an inclusive and sustainable future for the UK.”
Finance chiefs were committed to growth following the election, as corporate risk appetite saw its biggest rise in over four years, with 36 per cent of CFOs reporting now was a good time to take greater risk onto their balance sheets.
In contrast, only 23 per cent of finance leaders rated the levels of external financial and economic uncertainty facing their business as ‘high’ or ‘very high’, an eight year low.
“Finance leaders have entered the second half of the year in a confident mood. This is not solely a sentiment story, as expectations for revenue growth have also risen sharply,” said Ian Stewart, chief economist at Deloitte.
“Perceptions of uncertainty have fallen in the wake of the election and against a background of low inflation and a recovering economy. With corporate risk appetite on the rise, business is gearing up for growth.”
Looking ahead, expectations for corporate revenue rose to its highest level in over two years, and now sits at twice the long-run average.
The survey found that a net 64 per cent of CFOs expect UK corporate revenues to increase over the next year, up from just a net 42 per cent three months ago.
Meanwhile, finance chiefs also reported an improvement in credit conditions, rating credit as being more available than at any time in the last two years.
“A more predictable business environment has boosted the spirits of the corporate sector, and shows that the worries around Brexit, Covid-19, inflation and politics that have weighed on corporate spirit for much of the last eight years are clearing,” added Stewart.
The only persistent problem that remains for CFOs is geopolitics, selected as the top risk to business and receiving its highest rating since Russia invaded Ukraine.
When asked about the impact of the election on their business, CFOs were tilted towards the election having a mildly positive effect (21 per cent), with the majority (69 per cent) believing the election would have little or no impact on their plans.
Finance chiefs were also asked what they think the top economic priorities for the newly elected government should be, with industrial strategy being chosen first, followed by planning reform.