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Deloitte CFO Survey: Swiss CFOs expect a boom – European firms hopes for a swifter interest rate policy change

Zurich, 14 November 2017

Prospects for Swiss companies and the economy are better than at any point since the franc shock. The latest CFO Survey conducted by professional services firm Deloitte shows one record figure after another: Swiss CFOs assert that company revenues, margins and investments are all on the rise, and the economy as a whole is further reinvigorated. Among our European neighbours, companies in France appear particularly fired up. Also, CFOs in the eurozone are less than impressed by the European Central Bank’s interest rate policy. Meanwhile, UK indicators are pointing downwards.

Swiss CFOs are taking a more optimistic view of the future than at any point since mid-January 2015, when the Swiss National Bank (SNB) removed the franc’s exchange rate floor. 74% of CFOs (previous quarter: 71%) are positive about Switzerland’s economic prospects; almost four-fifths (79%; previous quarter: 76%) are budgeting for more revenue over the next 12 months. Over two-thirds (68%; previous quarter: 66%) take a positive view of their own company’s financial prospects. And 41% (previous quarter: 38%) expect higher margins, meaning that profits at Swiss businesses also look set to improve in the year to come.

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The survey also points to an increase in investment spending, most of it planned in Switzerland, which augurs well for the domestic economy. The heightened optimism is mainly attributable to, alongside the generally favourable economic figures, the weakening of the Swiss franc. This means, however, that this positive sentiment is vulnerable should the franc strengthen again. As such, exchange rate risks are at the top of CFOs’ lists of concerns. Nevertheless, this danger is less pronounced than in the past seeing that a majority of Swiss companies have since adapted to the more volatile environment and exchange rate risks.

Internal corporate risks rank second among CFOs’ concerns. In the past months, geopolitical risks have retreated from the centre of attention somewhat. “Swiss companies generally have confidence in the economic data environment in Europe and in the stability of global trade. They also appear to be increasingly reconciled to the current unpredictability of US policy. They have got their own companies into shape and enhanced their capacity to analyse and respond to situations. They are also making innovative products and services less vulnerable to external risks,” says Michael Grampp, Chief Economist at Deloitte Switzerland.

Prospect of an upswing is creating positive sentiment

Michael Grampp adds that “Swiss CFOs are looking forward to an upswing – all the relevant indicators are pointing upwards. However, while the economic upturn is expected to arrive in 2018, it needs to be made to happen. There can be no letting up on efforts. In general terms, however, we can already say that Swiss businesses have got over the franc shock and that its effects have been less damaging than was surmised at the time. Many companies in export-oriented sectors had heavily cut back on investment and recruitment. There is now once again a widespread appetite for investment; export-oriented companies are also much more likely than others to expect to increase their headcount.”

European companies are upbeat – but not those in the UK

The survey of more than 1,500 CFOs in 30 other European countries carried out at the same time shows that firms in most of these countries rate their own companies’ prospects more favourably than in the previous six months. The CFOs also expect high and rising revenues, more investment and a significant increase in headcount – a very encouraging sign given the persistent high levels of unemployment in southern Europe.

Among the big economies, CFO expectations in France seem to be verging on euphoria (as to company prospects, investment and headcount), while some figures for German (revenues), Italy (margins) and Spain (investment) are also very good. Perceived uncertainty continues to decrease in all the major economies except the UK, where almost all the key figures have deteriorated in response to the uncertainties over Brexit.

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Most eurozone CFOs surveyed in September still assumed that interest rates would rise within a year. They are since likely to have been rather disappointed by the ECB’s decision on interest rates at the end of October. However, two-thirds of eurozone CFOs do not see monetary policy as a central concern and would not change their strategy even if interest rates were to be changed.

“It is CFOs from countries with stronger economies in particular who tend to take a critical view of the ECB’s monetary policy. Most of them see it as too accommodating and fear the creation of property bubbles or over-reactions on the financial markets. They are not keen to keep waiting for years for an interest rate hike, and they long for a return to monetary policy normality,” says Dennis Brandes, Senior Economic Analyst at Deloitte Switzerland and co-author of the survey.

No interest rate reversal in Switzerland before 2020

The country where the fewest CFOs expect an interest rate increase in the next 12 months is Switzerland. “Companies in Switzerland are once again expecting the negative interest rate policy to be continued for some time. Even if economic growth is stable, the SNB can hardly raise interest rates before the eurozone does, so we are not expecting a policy reversal before 2020,” is how Dennis Brandes sees it.

Detailed information on and data sets from the Deloitte CFO Survey can be found on our website.
The European results are available in Deloitte’s Interactive CFO Survey magazine.

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