Deloitte: UK CFOs gear up for stronger recovery as business sentiment hits new high

Ian Stewart

The UK CFO Survey Q1 2021 released today reports that CFOs anticipate a strong recovery in profits over the next 12 months, with expectations back to the previous high seen in mid-2014 at the top of the economic cycle.

A brighter backdrop has tilted companies away from defensive strategies, such as cost control, while expectations for hiring and investment have reached their highest levels in nearly six years.

Conducted between the 17 and 30 March 2021, Deloitte’s latest quarterly CFO Survey captured sentiment amongst the UK’s largest businesses at the height of the third lockdown.

The latest survey saw 100 CFOs participate, including CFOs of 21 FTSE 100 and 42 FTSE 250 companies. The combined market value of the 69 UK-listed companies that participated is £547 billion, approximately 22 per cent of the UK quoted equity market.

The pandemic is now seen as having a less negative effect than previously feared. The proportion of CFOs who think the pandemic will reduce capital spending in the next three years has dropped from 65 per cent last summer to 19 per cent in Q1. The proportion expecting the pandemic to reduce hiring has fallen from 74 per cent to 29 per cent, over the same period.

The research suggests that CFO perceptions of economic uncertainty around Brexit have plummeted from the record levels seen a year ago. The successful rollout of vaccines in the UK, the prospective re-opening of the economy and a gathering US recovery have all helped.

Close to 10 per cent of the surveyed CFOs have experienced significant or severe disruption to their businesses due to Brexit. However, CFOs believe that such disruptions will fade, with only three per cent expecting significant or severe levels of disruption in a year’s time.

Ian Stewart, Deloitte’s chief economist, said: “Brexit has been a significant dampener on business activity in the last four years but with the UK’s final departure from the EU, such effects are fading. Combined with a successful vaccine rollout and a greatly improved global backdrop we are seeing a turbo-charged surge in business optimism.

“Having come through the deepest downturn in 300 years UK businesses are firmly focussed on growth. Pent-up business and consumer demand are set to power a strong profits recovery, one already anticipated by the surge in equity markets since February.”