UK: Deloitte Monday Briefing: CFO Confidence Triple Dips

Last Updated: 9 July 2012
Article by Ian Stewart
  • The second quarter Deloitte Survey of UK Chief Financial Officers is published this morning. It provides a striking picture of the attitudes of the UK's largest corporates to risk, strategy and financing.
  • 137 CFOs, including 39 at FTSE100 companies, took part between 15th and 29th June. Respondent companies account for 34% of the quoted UK equity market. The full survey report is available at:
  • A recession at home and troubles in Europe have taken a toll of UK business sentiment. CFO confidence has seen the biggest decline since the Survey started in 2007. This is the third big fall in business confidence in five years.
  • Caution is on the rise. 80% of CFOs say this is not a good time to take risk onto their balance sheet. 95% believe their businesses face an above normal, high or very high level of macroeconomic risk.
  • On average CFOs attach a 36% probability to one or more members of the Single Currency leaving the euro by the end of this year. Major UK-based corporates have also stepped up their preparations for the possibility of a breakup of the euro. 28% of CFOs say their own plans for coping with a breakup are "all made" or "at an advanced stage" compared to 18% in March.
  • This quarter's special questions included one from the Bank of England on capital spending. It shows that CFOs see macroeconomic uncertainty and the outlook for demand as being far greater influences on capital spending decisions than the availability of external finance. In fact just 4% of CFOs cited external finance as an influence on recent capex decisions.
  • Corporates are reacting to tougher conditions with a focus on cost control and boosting cash flow – these are now CFOs' top balance sheet priorities for the next 12 months. However, more internationally focused companies have a much more expansionary approach – their top priority is introducing new products or services.
  • CFOs expect corporate hiring and capital spending to contract over the next year. This clearly challenges the notion of the corporate-sector lead recovery.
  • The latest CFO Survey suggests that economic uncertainty is acting as a significant constraint on corporate expansion. One of the central challenges for UK-focussed corporates is to find sources of growth in what is likely to remain a weak and volatile economic environment.


The FTSE ended the week 1.6% up, boosted by a further round of Quantitative Easing in the UK and an interest rate cut in the euro area.

Here are some recent news stories that caught our eye as reflecting key economic themes:


  • The Bank of England elected to keep interest rates at 0.5% and extend its asset purchase programme by a further £50bn – quantitative easing
  • The European Central Bank cut eurozone borrowing costs to a new record low of 0.75%, whilst cutting the deposit rate to 0.0% - interest rates
  • Eamon Gilmore, Ireland's deputy prime minister, claimed the agreement allowing eurozone bailout funds to be lent directly to European banks "is a massive breakthrough for Ireland" – euro crisis politics
  • The German Constitutional Court said it will hold a hearing on whether the eurozone bailout fund impinges on the sovereignty of Germany – euro crisis politics
  • A group of 172 German economists wrote an open letter to Chancellor Angela Merkel warning against moves "toward a banking union" – euro crisis politics
  • Finland announced it would block plans to allow the eurozone bailout fund to buy government bonds in the open market – euro crisis politics
  • The amount of unsecured credit taken on by UK consumers rose 93% in May from April, driven by a rise in overdrafts and personal loans – squeezed consumers
  • UK discount retailer Poundland saw profits grow 26.5% in the year to April – Poundland
  • UK annual shop price inflation slowed to 1.1% in June, according to the British Retail Consortium, its lowest rate since November 2009 – disinflation
  • Survey data showed growth in the UK service sector slowed in June from May, driven by weak demand and the extra Jubilee bank holiday – slowdown
  • Survey data showed activity in the UK construction sector fell at the fastest pace for two and a half years in June from May – slowdown
  • The US economy added a lower than expected 80,000 jobs in June according to monthly non-farm payrolls data – slowdown
  • US manufacturing activity contracted for the first time in three years, according to survey data from the Institute for Supply Management (ISM) – slowdown
  • Survey data showed that eurozone private sector activity contracted for the fifth consecutive month in June – slowdown
  • Unemployment in the eurozone rose to 11.1% in May, the highest rate since the establishment of the single currency – unemployment
  • Portugal's prime minister Pedro Passos Coelho urged the country's unemployed to "show more effort" and advised teachers unable to find a job to think about emigrating to Angola or Brazil – unemployment
  • Prime Minister David Cameron said the UK government would do "whatever it takes" to restrict immigration in the event of a eurozone break-up – euro crisis politics
  • Credit ratings agencies Moody's and S&P lowered their outlook on Barclay's from stable to negative – LIBOR scandal
  • The price of a barrel of Brent Crude oil rose above $100 for the first time in months, partly driven by strike action by Norwegian oil workers – oil
  • Central banks increased their holdings of Japanese Yen by 7% in Q1 2012, according to data from the International Monetary Fund – flight to safety
  • Slovenian finance minister Janez Sustersic said a future bailout for the eurozone country "can't be ruled out" – euro debt crisis
  • Russian finance minister Anton Siluanov confirmed that Cyprus has asked for a €5bn loan from Russia, as well as assistance from the European Union – euro debt crisis
  • Ireland returned to the bond market for the first time since September 2010, with a €500m auction of 3-month Treasury Bills – Ireland
  • The UK Treasury is to postpone its weekly bond auctions for a 4-week period over the Olympic Games, as many bond traders will be working from home - trading options
  • A German university is suing a student for completing his degree in 3 semesters instead of the usual 11, asking him to pay the $3,772 shortfall in fees – life lesson

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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