European CFO Survey Autumn 2024

Earlier in 2024, Europe’s chief finance officers (CFOs) were optimistic as inflation and interest rates looked set to decline. While rates have indeed fallen, the cuts have been modest. However, lower inflation and the initial interest rate cuts by central banks have yet to ignite economic momentum, with fears about insipid global growth persisting.  

Additionally, conflicts in the Middle East and in Ukraine, along with global trade tensions, pose further worries. These economic and political uncertainties are unlikely to recede soon. Until clarity emerges and growth gains momentum, the mood of Europe’s CFOs will likely remain subdued.

Spring optimism wanes
In the spring 2024 survey, 36% of CFOs were optimistic about their company’s prospects. This represented a notable improvement from autumn 2023, when only 22% of CFOs felt optimistic, while 34% were pessimistic about their company’s outlook. However, our latest survey shows that Europe’s CFOs have not returned to their anxiety of a year ago, nor built further on their optimism of the spring. Instead, they appear to have a neutral outlook on their companies: 27% of CFOs are downbeat about their firms’ prospects, while 28% remain optimistic.

A constant trend across the last three surveys is telling: In each, around 45% of CFOs expected their firms’ prospects to remain broadly unchanged. Over the past year, most CFOs have retained a largely neutral outlook on their company’s prospects, seeing little room for robust growth yet no danger of steep decline. As usual, sentiment varies considerably between countries.

Macroeconomic trends are strongly reflected at the industry level. CFOs in financial services (41%) and business and professional services (40%) report the highest optimism about their companies' financial prospects. With the European Central Bank having cut key interest rates three times this year by a quarter of one percentage point, and the Bank of England twice, further reductions are widely expected – a prospect the financial sector views positively.

While cheaper money could benefit most sectors, the muted outlook for Europe’s economy is reflected in the significant proportion of CFOs in transport and logistics, life sciences and consumer goods (54% each) who report broadly unchanged sentiment about their company's prospects.

Declining optimism about operating margins
While European CFOs remain confident in revenue growth, their sentiment on operating margins is tempered by concerns about cost pressures and a challenging economic environment. Only 35% of CFOs expect margins to increase over the next 12 months, just slightly above the 30% who expect a decrease. This represents a small decline since spring, when 39% of CFOs anticipated rising margins.

The lack of skills and geopolitical tensions top the list of concerns
The shortage of skilled labour is identified as the top risk by Europe’s CFOs in 11 out of 18 countries. This challenge is driven by Europe's ageing population, which is shrinking the workforce and creating a gap in younger talent. Additionally, rapid advancements in fields such as artificial intelligence, data analytics and robotics are increasing the demand for workers with specialised skills.

Geopolitical risks and weaker domestic demand are also significant concerns, cited in nine out of 18 countries. Issues such as the Russia-Ukraine conflict, tensions in the Middle East and fears over protectionism, trade disruption and sluggish economic growth are keeping CFOs anxious.

Strategically, firms focus on cost-cutting and organic growth
In line with the current climate of caution, CFOs in a resounding 14 out of 20 European countries have identified cost reduction as their top strategic priority for the coming year. This focus underscores the need to optimise operations and preserve profitability amidst ongoing political and economic uncertainty.

Organic growth through internal expansion and leveraging existing strengths is the second most important strategy, selected by CFOs in 12 out of 20 countries. This approach reflects a preference for sustainable growth by capitalising on current market opportunities rather than high-risk ventures.

Explore the full survey on Deloitte Insights