Press releases

Deloitte CFO Survey: Brexit blow to business confidence

18 July 2016

  • Uncertainty soars while optimism, risk appetite and revenue expectations drop sharply
  • CFOs shift to defensive strategies, predicting slowdowns in hiring and capital spending
  • Business calls for clarity on EU negotiations and support for banking system
  • Deloitte CEO: “Businesses recognise their important role in forming a positive future for the UK outside of the EU.”

Confidence among the Chief Financial Officers (CFOs) of the UK’s largest companies has taken a sharp fall following the referendum on the UK’s membership of the European Union (EU), according to Deloitte’s latest CFO Survey.

The survey shows significant downturns in corporate optimism and risk appetite. CFOs are shifting to defensive balance sheet strategies and becoming more cautious of all forms of spending.

132 CFOs of FTSE 350 and other large private companies participated in the Q2 2016 CFO Survey. Of those listed companies, their combined market capitalisation is £365bn. The survey ran from 28 June to 11 July, capturing business sentiment in the immediate aftermath of the 23 June referendum and during a period of significant political uncertainty.

Uncertainty rises, optimism and risk appetite drop sharply
95% of CFOs say the level of uncertainty facing their business is above normal, high or very high, up from 83% in Q1 and returning to levels last seen in the Euro crisis in 2012.

73% of CFOs said that they are less optimistic about the financial prospects for their company, up from 32% in Q1, the highest level registered since Deloitte’s survey began in 2007 and higher than during the fallout from the Lehman collapse in 2008.

Just 8% of CFOs say now is a good time to take risk onto their balance sheet, down from 25% in the last quarter and its lowest level since Q1 2009.

63% of CFOs say they expect revenues at their firms to decrease in the next year, up from 11% in Q1 and the highest level recorded. However, 23% predict an increase in revenues. 70% expect operating margins to decrease, the highest level on record, and up from 37% in Q1.

Hiring and spending plans hit
82% of CFOs expect their firms to shrink capital spending in the next year, with 83% forecasting a slowdown in hiring. Both are the highest level recorded by Deloitte’s survey and up significantly from 34% and 29%, respectively, in Q1.

The proportion forecasting a cut in discretionary spending (82%) is the highest since Q4 2011.

Brexit dampens three year outlook
CFOs were asked what effect they expected the UK’s exit from the EU to have on their spending plans over the next three years.

58% expected capital spending to be somewhat or significantly lower over this period, 66% expected hiring to be lower and 74% saw discretionary spending being lower.

Overall, 68% of CFOs believe that leaving the EU will lead to a deterioration in the UK business environment in the long term. 20% expect little change and 13% expect an improvement.

CFOs pivot to defensive mode
For the first time since Q1 2015, the top two balance sheet priorities for major UK corporates are defensive. 47% of CFOs say reducing costs is a strong priority for the coming 12 months, up from 40% in Q1, with 41% looking to increase cash flow, up from 37% in Q1.

Strategies involving expenditure or taking risk have dropped sharply down the priority list. 27% are looking to introduce new products or services, down from 43% in Q1, 7% plan to increase capital expenditure (16% in Q1), while 3% plan to increase dividends or share buybacks (12% in Q1).

Priorities for policymakers
CFOs were asked what steps they believe the government can take to support economic activity as the UK recasts its relationship with the EU.

Two factors dominated CFOs’ list of demands. 91% said that a strong signal about the government’s aims in the negotiations with the EU should be a priority while 88% said that maintaining the solvency and liquidity of the banking system was essential.

In third place, 25% said that the government should continue with a deficit reduction plan while 16% said that raising public expenditure would help. Just 9% say that tax cuts would help economic activity, 6% call for additional quantitative easing and 3% favour cuts to interest rates.

54% of CFOs say they expect interest rates to be below 0.5% in a year’s time, with 38% forecasting rates staying at 0.5%.

David Sproul, senior partner and chief executive of Deloitte, said:
“The outcome of the EU referendum has triggered a sharp, negative response from the corporate sector.

“This survey was conducted immediately after the referendum, against a backdrop of historical political upheaval and financial uncertainty. The faster-than-expected appointment of a new Prime Minister removes one source of uncertainty, now the government must set out its vision for the UK’s future relationship with the EU to provide further stability and reassurance. As companies begin to feel the environment stabilising, we may see confidence improve in next quarter’s survey.

“The UK remains a vibrant, innovative and highly-skilled economy and I continue to believe it can navigate through a time of change, retain its global influence and remain a magnet for international talent and investment. My own conversations with chief executives and chairmen also provide reassurance that some priorities haven’t shifted. Businesses are still looking to take advantage of advances in technology and digital and increasing productivity. The Leave vote and subsequent uncertainty has made these more important to pursue.

“Businesses recognise their important role in forming a positive future for the UK outside of the EU. They must play their part in the coming years, being proactive in finding ways to boost productivity and drive growth, manage the risks Brexit poses, take advantage of the opportunities it creates and make their voices clearly heard in the debates around the UK’s future relationships with Europe and the wider world.”

Ian Stewart, chief economist at Deloitte, said:
“CFOs do not seem to be waiting for growth to slow before adjusting direction. There has been a marked shift to more defensive balance sheet strategies in the wake of the referendum, with a focus on reducing costs, building up cash flow and caution on all forms of spending.

“Corporate willingness to take risk has seen one its largest ever declines while the outlook for capital spending, hiring and discretionary spending is at levels last seen just before the so-called “double dip” slowdown of 2012.

“Perceptions of uncertainty have soared to levels last associated with the euro crisis five years ago. The spike in uncertainty has had a toxic effect on business sentiment with optimism dropping to the lowest level since our survey started in 2007, lower, even, than in the wake of the failure of Lehman in late 2008.

“However, the immediate scale of post referendum shock has not been of the same scale as 2008. Sterling has fallen faster but UK equities have proved more resilient. Consumer confidence in July recorded its sharpest monthly fall in almost 22 years, but it remains much stronger than it was post-Lehman.”


Notes to editors

About the Deloitte CFO Survey
This is the 36th quarterly survey of Chief Financial Officers and Group Finance Directors of major companies in the UK.

The 2016 Q2 survey took place between 28th June and 11th July, following the referendum on the UK’s membership of the EU on 23rd June.

132 CFOs participated, including the CFOs of 25 FTSE 100 and 57 FTSE 250 companies. The rest were CFOs of other UK-listed companies, large private companies and UK subsidiaries of major companies listed overseas. The combined market value of the 94 UK-listed companies surveyed is £365 billion, or approximately 16% of the UK quoted equity market.

The Deloitte CFO Survey is the only survey of major corporate users of capital that gauges attitudes to valuations, risk and financing.

For copies of previous CFO Surveys, please visit

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see for a detailed description of the legal structure of DTTL and its member firms.

Member of Deloitte Touche Tohmatsu Limited.

Mark Smith
Deloitte LLP
+44 (0)20 7007 7082
+44 (0)7590 041 301

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