UK: Deloitte Monday Briefing: UK CFO Survey Signals Political Risks & Corporate Spending

Last Updated: 9 July 2014
Article by Ian Stewart

A personal take on economics from Ian Stewart, Deloitte's Chief Economist in the UK.

  • The second quarter Deloitte Survey of UK Chief Financial Officers is published this morning. This is the 28th CFO survey; 112 CFOs, including 31 at FTSE100 companies, took part in the survey between 6th and 23rd June. The full survey report is available at:
  • The survey shows that political risk has eclipsed worries about the economy as a concern for UK CFOs. CFOs rank next May's General Election and the possibility of a referendum on EU membership as greater risks for their businesses than higher interest rates, bubbles in housing or financial markets or weakness in emerging markets or the euro area.
  • Such views contrast with CFO beliefs that levels of economic and financial risk have fallen sharply in the last year. The macro worries that have acted as a drag on corporate activity have lifted, but CFOs are already thinking ahead to next May's election.
  • The survey shows a growing shift from balance sheet repair to growth by UK corporates. Cost control, debt reduction and building up cash helped get business through the recession. The weight CFOs attach to such defensive strategies dropped to a four-year low in the second quarter.
  • Credit is cheap and easily available for the large companies in the CFO Survey and a record 83% of companies rate bank credit as an attractive form of finance for their business.
  • Backed by secure balance sheets and a strong financing environment growth is the top balance sheet priority for UK corporates. CFOs are looking to take greater risk, with 65% saying now is a good time to do so. Expectations for capital spending, hiring and discretionary spending have risen strongly in the last year.
  • The positive sentiment in the CFO Survey is increasingly being reflected in the hard economic numbers. Hiring by the private sector has risen by 3.2% in the last year and business investment has risen by 10.6%. In May, corporate bank borrowing saw the first year-on-year increase in five years.
  • The message from the CFO Survey is that corporates are prioritising expansion over further strengthening of their balance sheets. This cross checks with official data which show that the financial surplus of the UK corporate sector – a proxy for corporate saving – is shrinking, a development which is consistent with a period of corporate-led growth.
  • In its early stages the UK recovery was driven by the consumer and housing. Corporate spending is emerging as a driver of UK activity, offering the prospect of better balanced growth. But with the General Election less than a year away uncertainties around political and policy risk have moved centre-stage.


UK's FTSE 100 ended the week up 1.6% following strong US jobs data and increased optimism over the global economy.

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


  • US firms created a greater-than-expected 288,000 jobs in June, with the country's unemployment rate falling to its lowest since September 2008
  • The US Dow Jones Industrial Average rose above 17,000 for the first time, rising more than $200bn in value in a week
  • The International Monetary Fund lowered its 2014 growth forecast for France to 0.7%, urging its government to continue efforts to boost competitiveness
  • The Economist reports that, amongst OECD countries, the French government has the most valuable portfolio of shares in listed firms
  • The Irish economy grew at a faster-than-expected 2.7% in the first quarter – an annualised growth rate of 4.1% – reaching its pre-crisis output peak
  • The Chinese territory of Macau overtook Switzerland to become the world's 4th richest territory per person according to World Bank data, behind only Luxembourg, Norway and Qatar
  • New car sales in the UK rose for the 28th month in a row, extending a run not seen since the 1980s
  • The surging British construction sector has led to stocks of bricks falling to their lowest levels for almost 5 years according to official statistics
  • The association that represents 90% of UK cinemas has banned Google Glass headsets from its cinemas, out of fear over illegal recordings of films
  • A joint-venture between France's Keolis and support services group Amey won the contract to take over the Docklands Light Railway from December until 2021
  • Jamaica sold $800m of dollar bonds at a rate of 7.6% in its first overseas debt sale since 2011, having received a $2bn bailout last year
  • The US will remain the world's biggest oil producer this year according to Bank of America Corp., with extraction of energy from shale rock set to keep production above that of Russia or Saudi Arabia
  • The Guardian reports that John Lewis, Marks & Spencer and Tesco are among the UK retailers holding events in July to showcase their Christmas offerings
  • Janet Yellen, recently appointed Chairwoman of the US Federal Reserve, is facing complaints from neighbours in her gated community who say her new security detail is disrupting the neighbourhood
  • Ukraine has asked for the return of its military dolphins – who are trained to identify obstacles, locate missing kit and attack enemy frogmen – after they 'defected' to Russia following the annexing of Crimea – surf war

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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