Insights

Deloitte European CFO Survey

Positive attitudes to investment despite a dent in confidence

71% of Irish CFOs report a high level of external financial and economic uncertainty – Irish CFOs had the greatest increase in perceived uncertainty across all European countries

14 November 2018 CFOs across Europe remain focused on their company’s growth despite uncertainty levels rising and risk appetite declining, according to Deloitte’s latest European CFO Survey.

Deloitte has collated the results of surveys run by its member firms in 20 European countries for the autumn edition of the European CFO Survey, giving the views of 1,373 CFOs.

Commenting on the Irish findings Daniel Gaffney, Partner at Deloitte Ireland said: “Our survey shows that CFOs are getting increasingly worried about the levels of financial and economic uncertainty, with 71% of Ireland’s CFOs rating the overall level of uncertainty as high. This is being driven by a number of factors including uncertainty around Brexit and global trade tensions. This has made CFOs more cautious with a greater proportion of focus going on internal development as opposed to M&A. The importance of organic growth and cost reduction were both found to be increasing in our survey and CFOs have backed themselves in this regard with 74% expecting to report an increase in revenue.

“After geopolitical risks and economic outlook/growth concerns, a shortage of skilled professionals is the third most significant risk in the minds of Irish CFOs once again. This is unsurprising, as the Irish economy approaches full employment, which has not been seen since prior to the economic crisis in 2008.”

Irish key stats

• 71% of Irish CFOs report a high level of external financial and economic uncertainty. This was the greatest change in perceived uncertainty across all European countries, having increased significantly from 35% in the prior period.

• 74% expect to achieve revenue growth over the next 12 months, a decrease from H1 2018 (84%) and H2 2017 (81%).

• Cost reduction is the second priority for businesses over the next 12 months, having ranked fifth in the prior survey.

• 42% of Irish CFOs say they are more optimistic than they were six months ago, but this has decreased from 57% and 56% in the prior two surveys.

• A shortage of skilled professionals is the third most significant risk in the minds of Irish CFOs.

• 26% of Irish CFOs would increase automation by a large extent to address skills shortages.

Optimism and revenue expectations continue to drop

25% of Europe’s CFOs say they are more optimistic about the financial prospects for their company than they were three months ago, down from 38% in the spring 2018 survey.

26% say they are less optimistic, more than double from the previous survey (12%).

42% of Irish CFOs say they are more optimistic compared to six months ago; however, this figure has decreased from 57% six months ago.

Uncertainty levels rise

62% of European CFOs say there is a high level of financial and economic uncertainty, up from 52% in spring 2018.

71% of Irish CFOs report a high level of external financial and economic uncertainty. CFOs in the UK have the highest reading on perceptions of uncertainty, with 89% reporting high uncertainty, while CFOs in Sweden had the lowest with 14%. Perceptions of uncertainty are higher in non-euro counties, with 65% reporting high uncertainty, versus 59% in the euro area.

Risk appetite at an all-time low

Just one in four European CFOs (24%) say now is a good time to take greater risk onto their balance sheets, down from 34% in last spring’s survey and the lowest since the European CFO Survey began in 2015. 33% of Irish CFOs are willing to take on greater risk. Just 8% of CFOs in Turkey are willing to take on greater risk, the lowest across the 20 countries, compared to 45% in France.

27% of CFOs in euro area countries say now is a good time to take on risk, compared to 20% in non-euro countries.

Capex and hiring outlook drops slightly

39% of European CFOs forecast an increase in capital spending in the next 12 months, down slightly from 46%. 51% of CFOs in euro area countries plan to increase spending, compared to 23% in non-euro countries.

64% of CFOs in Ireland say they plan to increase capex, the highest across the 20 countries, compared to a low of 11% in the UK.

35% of European CFOs say they plan to increase employee numbers in the next 12 months, down from 42% in the spring. CFOs in Belgium are the most optimistic about employee numbers, with 59% forecasting an increase, while just 6% of CFOs in the UK plan to increase hiring, the lowest. 45% of CFOs in euro area countries plan to increase hiring, down from 49% in spring 2018, compared to just 20% in non-euro countries. 58% of Irish CFOs say they plan to increase their employee numbers in this period.

A skills gap, or lack of labour?

Survey responses show that there are differences between countries with regards to local labour market conditions. For example in Germany, the majority of CFOs felt there was a lack of labour, rather than skills. On the other hand, in countries such as Ireland and Greece, CFOs identified skills gaps more often as the main problem.

Overall, according to CFO respondents across Europe, job applicants are mostly lacking the appropriate technical knowledge (43%), followed by the necessary work experience (32%). 28% of CFOs consider problem solving/adaptability a difficult skill to find. In Ireland, the appropriate technical knowledge (47%) and problem solving/adaptability (42%) were the most difficult skills to find.

In order to address skills shortages, 43% of CFOs report that their company is making extensive use of automation. Only 16% focus on outsourcing of business processes and even fewer (12%) on offshoring. In Ireland, only 26% of Irish CFOs responded that they would increase automation by a large extent to address skills shortages.

Geopolitical risks remerge as biggest business concern

Concerns about geopolitical risks have overtaken the shortage of skilled labour, with CFOs in half of the countries surveyed, including Ireland, rating it as the biggest risk, up from one quarter of those surveyed six months ago.

CFOs are also becoming increasingly concerned about the general economic outlook, with 45% of those countries surveyed saying this was their biggest risk (up from 30%). The same percentage cite a skills shortage as a significant business risk.

CFOs sharpen their focus on expansion

In 13 of the 20 countries surveyed, including Ireland, CFOs cite more expansionary balance sheet measures as priorities than defensive measures, with organic growth the main expansionary focus for CFOs. This is up from the previous survey when CFOs in 11 of 20 countries were prioritising expansion.

ENDS

Issued by Murray on behalf of Deloitte

For Further Information Please Contact

Aoibheann O’Sullivan
Murray
01 498 0300
087 6291453
aosullivan@murrayconsultants.ie

Claire Quinn
Deloitte
01 417 2356
087 9777783
cquinn@deloitte.ie

Notes to Editors

This is the seventh edition of the Deloitte European CFO Survey, and the thirtieth edition of the survey here in Ireland.

The survey collates the findings of surveys conducted by Deloitte member firms in Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, the Netherlands, Norway, Poland, Portugal, Russia, Luxembourg, Sweden, Switzerland, Turkey and the United Kingdom.

In total, 1,373 CFOs took part in these surveys, conducted between August and September 2018. Over 50 CFOs in Ireland participated.

Percentages used in the report are weighted by GDP to provide accurate comparisons, taking into account individual countries’ GDPs in relation to the total GDP of the 20 participating countries.

The full survey results, and previous surveys are available to view at www.deloitte.co.uk/europeancfosurvey

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