Posted: 08 Oct. 2018 5 min. read

Brexit worries dominate latest CFO Survey

The third quarter Deloitte survey of UK Chief Financial Officers released today shows concerns about Brexit weighing heavily on business sentiment.

CFOs rate Brexit as being by far the biggest threat to business over the next 12 months, ahead of weak UK demand, trade wars and geopolitics, in the league table of CFO concerns. Indeed, CFOs are more negative about the effects of Brexit today than at any time since the EU referendum.

CFOs have become more pessimistic about the long-term effect of the UK’s departure from the EU. 79% expect Brexit to lead to a deterioration in the business environment, up from 60% a year earlier. 6% of CFOs anticipate that Brexit will result in an improvement in the business climate compared with 14% a year ago.

Meanwhile CFO confidence has fallen to the lowest level in two years, although above the record, and short-lived, low seen in the aftermath of the Brexit referendum.

Large corporates are pulling in their horns, with just 12% of CFOs saying now is good time to take risk. CFOs say Britain’s departure from the EU is likely to act as a drag on their spending decisions. 44% of respondents expect their own capital spending to be lower over the next three years as a result of Brexit; half expect hiring to be lower.

CFOs have become much more defensive in the way they run their balance sheets, continuing a trend underway since early 2017. Cost reduction is the top corporate priority and CFOs are more focussed on reducing costs than at any time in the last eight years.

The paradox is that this quarter’s survey took place in the wake of a modest rebound in UK economic activity in the second quarter. After a run of weak activity data earlier in the year UK data have been coming in stronger than market expectations in recent months. In August the Bank of England’s Monetary Policy Committee felt sufficiently emboldened by the momentum of growth to raise UK interest rates.

Brexit is drowning out better news on growth. With CFOs having to contemplate the risk of a no deal exit from the EU Brexit is the only game in town for now. If the UK and the EU strike a deal and agree a smooth transition, there could be scope for a relief rally in sentiment. The reverse, of course, also holds.

To read the full report and download the survey data please click on the link below:

Key contact

Ian Stewart

Ian Stewart

Partner and Chief UK Economist

Ian Stewart is a Partner and Chief Economist at Deloitte where he advises Boards and companies on macroeconomics. Ian devised the Deloitte Survey of Chief Financial Officers and writes a popular weekly economics blog, the Monday Briefing. His previous roles include Chief Economist for Europe at Merrill Lynch, Head of Economics in the Conservative Research Department and Special Adviser to the Secretary of State for Work and Pensions. Ian was educated at the London School of Economics.