Brexit concerns top CFO survey

Brexit-related themes head up the list of risk concerns featured in a survey of CFOs, but finance chiefs say they are responding to these challenges with a renewed focus on cost control.

Finance chiefs responding the Deloitte CFO Survey said Brexit continues to be the primary concern facing businesses, ranked 62 (on a scale of 0-100), up from 58 last quarter.

Furthermore, 73% of CFOs anticipate the country’s business environment to deteriorate following Brexit, while 41% expect hiring within their business to slow and 39% expect their capital spending to decrease.

With outcomes of Brexit negotiations hanging in the balance, 38% of CFOs said there is a high or very high level of uncertainty facing their business.

Ian Stewart, chief economist at Deloitte, said: “In a world of accelerating growth and buoyant equity markets, domestic risks loom large. Reining in costs can help CFOs mitigate these risks.”

He added: “Despite December’s agreement to move forward to trade talks with the EU, CFO’s concerns about Brexit have mounted and it remains at the top of the list of risks for business in 2018.”

Following Brexit, CFOs’ next highest concern was weak demand in the UK, ranked 59 on a scale of 0-100. Concern about UK productivity ranked third.

Over half (51%) of CFO respondents said that cost reduction was a priority for their business in the upcoming year, with focus on cost control becoming the highest in eight years of the survey.

Likely to be interlinked with the high levels of uncertainty facing businesses, optimism levels dropped from 27% to 18% of CFOs giving optimistic views on their company’s prospects this quarter. The appetite for risk also dropped.

When surveyed on interest rates, only 15% of CFOs believed the rate will remain at 0.5%, and 85% believed it will reach or surpass 0.75% by the beginning of 2019.

Despite increased uncertainty and decreased optimism, CFOs still expressed an appetite for growth, with the level of desire to expand over the next year at its highest level since the question was first asked in 2009.

This includes organic growth as well as growth through acquisitions, expanding new services, products or into new markets.

David Sproul, senior partner and chief executive of Deloitte North West Europe, added: “Encouragingly, far from backing away from growth as they did in previous periods of uncertainty, CFOs are putting more emphasis on expansion.”

“While the impact of Brexit remains the dominant concern for CFOs, it has not forced a retreat from growth or crushed the animal spirits of the corporate sector. The central challenge for UK business over the next 12 months will be achieving growth in an environment of stringent cost-control.”

Deloitte surveyed 112 CFOs of FTSE 350 and other large private companies for the Q4 2017 CFO Survey.

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