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General Election tops CFOs’ list of concerns

CFOs are more concerned about political risk than uncertainty about the economy, according to a survey of finance executives by Deloitte.

The quarterly Deloitte CFO Survey found that CFOs are most concerned by the outcome of the 2015 General Election and a potential referendum on the UK’s EU membership.

Of less concern to CFOs is the referendum on Scottish independence, which they rates as less worrying than interest rate rises and tightening of monetary conditions, volatility in emerging markets and the emergence of a housing bubble.

Despite worries about the policy backdrop, CFOs’ perceptions of economic and financial risk have continued to decline. Around half said that the level of external financial and economic uncertainty facing their business is above normal, high or very high, down from 73% in 2013 and 95% in 2012.

At the same time, 65% of CFOs said now is a good time to take risk onto their balance sheet, the second highest level on record and up from 45% in the second quarter of 2013.

Corporate defensiveness has dropped to its lowest level in four years while expansion has grown for the fourth consecutive quarter.

“UK corporates have shifted from balance sheet repair to growth and business spending is emerging as a driver of the UK recovery. Cost control, debt reduction and building cash helped get business through the recession but the weight CFOs attach to such defensive strategies dropped to a four year low in the second quarter,” said Ian Stewart, chief economist at Deloitte.

“With secure balance sheets and strong risk appetite, growth is the top balance sheet priority for UK corporates. CFOs’ expectations for capital spending, hiring and discretionary spending have risen strongly in the last year.

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