Deloitte's CFO Survey - Business confidence up and uncertainty down

• Sentiment among UK CFOs has risen for the third consecutive quarter;
• Uncertainty has fallen to a two-and-a-half-year low, back to levels seen in summer 2021 when lockdown restrictions were ending;
• Corporate risk appetite has risen, but CFOs maintain a defensive strategy stance;
• Cyber-attacks are the top concern for CFOs when it comes to the consequences of geopolitical developments;
• More than half of UK CFOs expect geopolitical risks facing their business to increase over the next three years.

CFOs of the UK’s largest firms are more optimistic about prospects for their own businesses, with sentiment rising for the third consecutive quarter, according to Deloitte’s latest CFO survey. A net¹ 17% of CFOs are more positive about the financial prospects of their business than they were three months ago.

The proportion of CFOs reporting high or very high levels of uncertainty facing their businesses has fallen to 36% this quarter, less than half the peak seen in mid-2022 (77%). This takes uncertainty back to levels last seen in the summer of 2021 (35%), a time when national lockdown restrictions were ending.

Ian Stewart, chief economist, said: “Optimism among the UK’s largest businesses is running at well above average levels², suggesting that the worst of the economic downturn is behind us, with current sentiment at levels that preceded periods of good growth in 2010, 2014 and 2021. Uncertainties driven by Brexit, the pandemic and inflation that have clouded the business scene for much of the last eight years seem to be clearing. For the first time in three years, CFOs expect margins to increase over the next 12 months.”

Conducted between 12 March and 25 March 2024, a total of 64 CFOs participated in the latest quarterly survey, including the CFOs of eight FTSE 100 and 23 FTSE 250 companies. The combined market value of the 37 UK-listed companies surveyed is £201bn, or approximately 8% of the UK quoted equity market.  

Inflation and rate expectations on the decline

Inflationary concerns are easing and CFOs’ expectations for inflation have continued to fall. Finance chiefs expect inflation to be at 2.9% in a year’s time, down from 3.5% last quarter. In two years’ time, CFOs expect inflation to be at 2.3%, down from 2.9% in the previous edition of the survey.

With inflation worries in retreat, finance chiefs believe that the UK is on the verge of significant easing of monetary policy, expecting the Bank of England to cut the UK base rate from the current level of 5.25% to 4.25% over the next 12 months.

Corporate risk appetite versus defensive strategies

The percentage of CFOs who see this as a good time to take greater risk onto their balance sheets has risen slightly from last quarter (by one percentage point) to 20%. However, finance leaders maintain their defensive strategy stance, with 56% rating reducing costs as a strong priority, and 43% rating increasing cashflow as a strong priority.

Ian Stewart commented: “Risk appetite and optimism are rising, credit conditions have improved, but CFOs remain focussed on controlling costs and building up cash. For now, expansionary strategies, such as capital spending and bringing in new products or services, are on the backburner. Given the challenges of recent years it is perhaps unsurprising that, for all the good news, a degree of caution persists.”

Geopolitics seen as top risk to business

CFOs still see geopolitics as posing the greatest risk to their businesses³ over the next 12 months, with a weighted average rating⁴ of 65. It has been rated as the top risk for the last three consecutive surveys.

However, concerns over UK productivity and competitiveness have risen. This ranks second on the risk list this quarter, with finance chiefs assigning it its joint-highest risk rating (57) in ten years. Inflation, energy supply problems and labour shortages have dropped down CFOs’ list of concerns, now rated sixth, fifth and fourth respectively.

Concerns around geopolitical developments

This quarter the survey also asked CFOs to assess the channels through which adverse geopolitical events could damage their own businesses. By far the greatest concern - at a weighted average rating4 of 72 - was that geopolitical developments could trigger cyber-attacks. This was followed by a general fall in demand across the economy, and disruption to energy supplies or higher energy prices.

Meanwhile, when asked about the outlook on geopolitical risk facing their business, 51% of CFOs expect the level of risk to increase over the next three years, with only 3% expecting it to decrease over this time.

Ian Stewart added: “While CFOs are more optimistic about the general outlook, and uncertainty has decreased, that does not apply to geopolitics. The overwhelming majority of CFOs expect geopolitical risk to increase or stay the same in the next three years. On this front at least, CFOs are anticipating further uncertainty.”

-Ends- 
 

Note to editors   

¹ A number of the Deloitte CFO survey findings are presented in terms of net balances – standard practice with surveys conducted by many central banks. In the case of the CFO optimism figures, CFOs were asked whether they are now more or less optimistic about the financial prospects for their firms than they were three months ago (or if their optimism remains unchanged). The net balance (net 17%) was then computed by subtracting the percentage of CFOs less optimistic from the percentage more optimistic. Net balances can also be negative. In the case of CFO optimism, a negative reading would imply a greater proportion of CFOs are less rather than more optimistic about their firm’s prospects. Throughout this press release and the survey report net percentages indicate where net balances are used to present findings.

² The average optimism over the 16-year history of the survey is a net -1%.

³ The 12 risk areas tracked in the survey are: 

• Rising geopolitical risks worldwide including forthcoming elections
• Poor productivity/weak competitiveness in the UK economy
• Higher energy prices or disruption to energy supplies
• Persistent labour shortages
• The risk of higher inflation and/or a bubble in housing and other real and financial assets 
• The prospect of further rate rises and a general tightening of monetary conditions in the UK and US
• Long-term effects of climate change 
• Economic weakness and/or volatility in US growth
• Medium-term supply chain disruption 
• Deflation and economic weakness in the euro area, and the possibility of a renewed euro crisis 
• Effects of Brexit/deterioration in UK-EU relations
• Weakness and/or volatility in emerging markets 
  

⁴ Weighted average ratings on a scale of 0-100 where 0 stands for no risk/concern and 100 stands for the highest possible risk/concern.  
 

About the survey   

This is the 67th quarterly survey of Chief Financial Officers and Group Finance Directors of major companies in the UK. The 2024 first quarter survey took place between 12 March and 25 March. 64 CFOs participated, including the CFOs of 8 FTSE 100 and 23 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 37 UK-listed companies surveyed is £201billion, or approximately 8% 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 www.deloitte.co.uk/cfosurvey  

About Deloitte 

In this press release references to “Deloitte” are references to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”) a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity.  
 
Please see deloitte.com/about for a detailed description of the legal structure of DTTL and its member firms. 
 
Deloitte LLP is a subsidiary of Deloitte NSE LLP, which is a member firm of DTTL, and is among the UK's leading professional services firms. 
 
The information contained in this press release is correct at the time of going to press. 
 
For more information, please visit www.deloitte.co.uk. 

Media contact:

Rosy C Taylor
Assistant PR Manager
rctaylor@deloitte.co.uk
+44 (0)29 2092 7541