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Lending fears ease as CFO confidence bounces back

BANK BORROWING is now viewed as offering a more attractive source of lending than at any time since the financial crisis began, according to a survey of finance chiefs.

A survey by Deloitte of 120 chief financial officers, including 26 from the FTSE 100, found that business confidence has improved for the third consecutive quarter as concerns over financial and economic conditions dropped to the lowest level for two-and-a-half years.

Credit conditions have eased for large companies for the third consecutive quarter, with over two thirds of CFOs finding credit more readily available, and rating bank borrowing as an attractive source of lending.

Despite the bailout of Cypriot banks last month, CFOs have become more confident that the euro area will hold together and believe there is a minimal chance that the euro will break up in the next 12 months.

“Reduced stress in financial markets, especially in the euro area, has delivered improvements in credit conditions for big UK corporates. It is a measure of the change that CFOs now rate bank borrowing as offering a more attractive form of finance than at any time since the start of the financial crisis,” says Ian Stewart, chief economist at Deloitte.

The survey found that corporate risk appetite is rising among CFOs, with 34% of those polled saying now is a good time to take risk on to their balance sheets, compared to 25% in the final quarter of 2012.

The economic uncertainty of recent years has led CFOs to adopt defensive balance sheet strategies such as cost control and increasing cash flow. But in the first quarter, CFOs have reduced the emphasis on these strategies, the survy said.

“Corporate appetite for risk is not far off the peaks seen in early 2011 when Europe looked set for a sustained recovery,” says Stewart.

“British business look set to benefit from a less risky and improving global economic backdrop. UK-based businesses with strong overseas exposure have become much more willing to take risk and are shifting towards more expansionary policies.”

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