2016 Q2 Global CFO SignalsTM


2016 Q2 Global CFO SignalsTM

Brexit: Overhang or hangover?

Results this quarter heavily reflect the run up to the UK’s Brexit vote on June 23—and its aftermath. And judging from the nine countries reporting in the Q2 2016 edition of Global CFO Signals, the impact depends on your perspective and your exposure.

How does CFO sentiment in Q2 2016 break down? What follows is a synopsis by region:

  • Australia: Confidence on the rise in a sea of uncertainty
  • Belgium: Post Brexit vote outlook
  • Japan: Tempered outlooks 
  • Netherlands: Rising concerns
  • North America: Less concern about markets; more about oil and politics
  • Southern Africa: Resilience in any climate
  • Switzerland: External environment dominates CFOs’ concerns
  • United Kingdom: Brexit hits confidence

CFO Sentiment 2016 Q2

Results this quarter heavily reflect the run up to the UK’s Brexit vote on June 23—and its aftermath. And judging from the nine countries reporting in the Q2 2016 edition of Global CFO Signals, the impact depends on your perspective and your exposure. Take the results in the three countries that surveyed CFOs post the vote:

  • For UK CFOs, the uncertainty caused by the surprise outcome sent optimism dropping to its lowest level since the survey began in 2007;
  • Similarly, in Belgium, CFO optimism turned negative and is down to its lowest level in three years;
  • Meanwhile, in Japan, CFOs expect the UK economy to decline, and 90% expect European economies to decline as well in the wake of Brexit.

Several countries surveyed before the vote recorded muted optimism given the Brexit overhang. But there were other risks at play as well, such as the strength of the US dollar, unstable oil prices, and uncertainty over monetary policies and the US Presidential election. “Brexit was a confidence shock,” says Chris Richardson, chief economist, Deloitte Australia: “When confidence was already a problem.”

One major exception: North America’s optimism rebounded strongly from Q1, when it hit its lowest level in three years. But given the low starting point, the rebound was relative, not absolute. And to Dr. Patricia Buckley, director, Economic Policy and Analysis, Deloitte Research, Deloitte Services LP, that optimism might be short-lived given that the last three quarters of GDP reflected a contraction in business investment—“the ultimate expression of business confidence.”

Going forward, Brexit’s impacts may be contained and slow to evolve. But they are likely to include a period of uncertainty and slower UK and EU economic growth in the short- and long-term, according to Dr. Ira Kalish, chief global economist, Deloitte Touche Tohmatsu Limited, and Ian Stewart, chief economist for Deloitte LLP in the UK (see “Brexit impacts: Considerations for US and UK CFOs”).

Still, for CFOs identifying potential risk exposures and considering strategies for doing business in the UK and the EU, there is some comfort in having the vote over without a widespread impact to the world economy. The lesson? “Just because something is on the front page doesn’t mean it will cause drastic changes,” says Richardson.

Regional perspectives


Substantial improvements in equity markets and consumer confidence fueled a reversal in several of last quarter’s downward trends. Year-over-year growth expectations improved across the board (but are mostly still below their survey averages), and net optimism came in at a strong +30.0 (compared with +1.7 in Q1). Concerns about oil prices and policy unknowns heading into a presidential election meant assessments of the North American economy were only slightly better than last quarter. But CFOs’ confidence in Europe remains weak, given concerns about Britain’s potential exit from the EU and other challenges. Meanwhile, assessments of China improved, but CFOs began voicing rising concerns about government debt there, and in other regions as well.


The two countries reporting in Asia-Pacific—Australia and Japan—document very different CFO outlooks. In Australia, for example, better news from China and the associated stabilization of key commodity prices— however modest and fleeting—appeared to be supporting a net 33% increase in confidence among CFOs from H2 2015. This was despite fears of Brexit and a knife-edge federal election result. In Japan, though, CFOs are wary despite the victory of the ruling coalition in the Upper House election when this survey was conducted. Their responses indicate that most CFOs do not expect political stability will necessary lead to improved economic growth rate. Such concerns have led to some 40% of CFOs reporting decreased optimism, and 73% reporting uncertainty as “high” or “very high.”


There is a divide in the European numbers this quarter with two countries (UK and Belgium) conducting their surveys after the Brexit vote and the other three (Netherlands, Russia, and Switzerland) just prior. The impact is particularly negative in the UK, where uncertainty is at levels last seen during the euro crisis of 2012. Risk appetite took a hit there, as it did in Belgium, where just 23% of CFOs say now is a good time to take risk onto their balance sheet, down from 38% in the first quarter and from 44% a year ago. Meanwhile, among Swiss CFOs, there is some good news: for the first time since the end of 2014, a majority of CFOs rate the country’s economic prospects over the next 12 months as positive. The same cannot be said for for Russia’s CFOs, who have their own concenrs separate from Brexit, including weakness in the ruble, stress in the financial ial system, and dwindling consumer demand. 

Pan Africa

Similarly, among the countries reporting in the annual Pan Africa survey, there are regional differences. South African CFOs are somewhat less optimistic about the performance of their companies in 2016, with 57% expecting a slight or significant improvement in performance compared to 61% in 2015. Elsewhere, there has been a drop in optimism among CFOs surveyed in Southern Africa, while CFOs in West Africa and East Africa have a somewhat more positive outlook for their companies in 2016. Many of their risk factors, however, differ too, but currency volatility weighs heavily across the board. And those risks have a significant majority (84% in South Africa alone) of CFOs saying they will focus on improving operational efficiency and process optimization this year.

According to the Deloitte economists, however, while the Brexit fallout may be slow to evolve, there are causes for concern longer term. “As growth slows in Europe, adding to slow growth in China and Japan, it may cascade through other regions,” says Buckley. In other words, this hangover may linger with us for a while.

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Global CFO Signals—By the numbers

Risk appetite

Risk appetite is tempered at best this quarter. A sharp spike in uncertainty caused by the Brexit vote has led to a particularly big drop in the UK, where just 8% think now is a good time to take risk onto the balance sheet. In Switzerland, 70% do not think it is a good time and neither do TK% of Belgium’s CFOs. In the Netherlands, though, some 52% of CFO are willing to take risk onto their balance sheets, as do 44% of Australia’s finance chiefs.


Uncertainty continues to dampen CFO decision-making—and outlooks. In Japan, some 73% of CFOs view current levels as either “high” or “very high,” as do 72% of Russian CFOs. UK CFOs’ perceptions of economic and financial uncertainty have risen to levels last seen during the euro crisis in 2012. And in Australia, 80% of CFOs believe current levels of uncertainty are actually holding back business investment.


Revenue expectations are far from robust, with sharp declines in the UK and Belgium, which both conducted their surveys after the Brexit vote. In the Netherlands, though, 65% of CFOs are expecting an uptick in revenue over the next 12 months. Meanwhile, the outlook on earnings has deteriorated in Japan, where 23% of the CFOs expect an increase compared with 43% last quarter. On the other hand, earnings expectations in North America, which hit their survey low of 6.0% in Q1 2016, rebounded to 7.7%.


Hiring is anemic, too. In the Netherlands, for example, almost one-third (32%) of CFOs expect to reduce their workforces, as do 29% of Switzerland’s CFOs. Moreover, in the UK, 66% of CFOs expect to cut headcount in the next three years due to Brexit. Meanwhile in North America, domestic hiring growth expectations did rise—but only to a less than stellar 1.1% from last quarter’s survey-low 0.6%.

Corporate strategy

Defensive strategies remain a common focus heading into the second half of 2016. Thanks to Brexit, reducing costs and increasing cash flow are again top priorities for CFOs in the UK. Improving operational efficiency and process optimization are top of mind in South Africa, Southern Africa, and East Africa. And in Russia, the focus is on restructuring and reducing costs .In North America, though, companies are more biased toward growing revenue and investing cash than they have been in several quarters.

CFO priorities

In North America, CFOs say their CEOs want to them to be “fact providers,” “challengers,” “stakeholder managers,” and “capital managers.” Which role dominates may be influenced by factors such as accelerated transformation and innovation-led strategy going forward, according to Australian CFOs. To cope with the complexity, CFOs in Africa are looking for solutions to retain staff and find work/life balance.

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To access previous Global CFO Signals reports, please visit the Global CFO Signals library page.

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