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CFO support for EU dampens, Deloitte finds

SUPPORT among CFOs for UK membership of the European Union has cooled over the third quarter of 2015/16, according to research from Big Four firm Deloitte.

The firm’s survey of 137 FTSE 350 CFOs found a 12-point swing in support for the UK’s continued membership of the EU, falling to 62% from 74% in the previous quarter.

That change in sentiment is not, however, opposition, with a growing portion – 28%, up from 23% – of finance chiefs keen to see how the prime minister’s renegotiation of the terms of Britain’s membership plays out.

Just 6% said UK business would benefit from leaving the EU, up from 2% in Q2, while 4% are uncertain of their position, up from 1% in Q2.

That change in attitude is indicative of a wider restraint among CFOs, Deloitte found, with 30% of CFOs saying they are less optimistic, up from 20%. Just 12% said they are more optimistic, down from 36% six months ago. This is the third consecutive quarter that corporate sentiment has fallen and it is now at its lowest level since Q2 2012.

In-keeping with that shift, CFOs’ appetite to take risk onto their balance sheets continues to wane. Around 37% of CFOs said now is a good time to take on risk, down from 47% in Q3’s survey and nearly half the level of the 72% seen in Q3 2014.

Balance sheet strategies, too, are becoming more defensive, with 44% of CFOs agreeing cost reduction is a strong priority, up from 34% in Q3. Some37% said increasing cash flow is a strong priority, up from 34% in Q3, and disposing of assets rose from 9% to 13%.

Deloitte chief economist Ian Stewart said: “UK corporate sector risk appetite has fallen to a three and a half year low mirroring the loss aversion and caution being seen in financial markets. With a much sharper focus on cost control and less emphasis on growth through acquisitions and capital spending, CFOs’ strategies are more defensive than at any time in the past three years.

“CFOs are most positive about growth in the UK and US in 2016. But despite stronger than expected growth in the euro area in 2015, UK CFOs remain pessimistic about prospects for the region. Levels of confidence about growth in the euro area are lower than for emerging market economies.”

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