TWO IN FIVE CFOs see a probability of the UK recession continuing or recurring during the next two years – despite feeling more confident about the business environment.
Deloitte’s quarterly survey of 133 major company CFOs found that only one in five expect to see revenues decline over the next year.
The net percentage of CFOs more confident about the financial prospects for their company than three months ago is still in negative, but approaching the zero point – an improvement compared to the record negative figure of last Q2 2012.
However, nine in ten CFOs said the economic uncertainties facing their business were ‘above normal’. The survey panel gave a 43% probability that the UK recession would continue to run, or come back, in the next two years.
Capital spending is of a lower priority for CFOs than at any other time than in the last two years, while increasing cash flow, cost-cutting, and reducing leverage are stronger priorities than at any point in the last two years.
Ian Stewart, Deloitte’s chief economist, comments: “CFO optimism has made up some of the record losses we saw in the second quarter of this year, when the euro crisis intensified. Spirits seem to have been lifted by the recent promise of more aggressive action from the Federal Reserve to support growth, and from the European Central Bank to strengthen the single currency.
“While external, macroeconomic risks abound the internal story for large companies looks much stronger, partly because of a favourable financing environment,” said Ian Stewart, Deloitte’s chief economist.
“Credit is rated as being cheaper than at any time in the last five years and financing costs are expected to stay low. For the large companies surveyed the cost and the availability of external finance rate as weak constraints on investment. CFOs report that long term growth in demand for their products and services is providing support for capital spending.”