8 minute read 23 May 2023

Room to breathe, room to think: Europe’s CFOs seem to have overcome the crisis mode

European CFO Survey - Spring 2023 edition

Jose Manuel Dominguez Carravilla

Jose Manuel Dominguez Carravilla


Richard Muschamp

Richard Muschamp

United Kingdom

Rolf Epstein

Rolf Epstein


Pauliina Sandqvist

Pauliina Sandqvist


Ram Krishna Sahu

Ram Krishna Sahu


Richard Horton

Richard Horton

United Kingdom

The Spring 2023 European CFO Survey finds that Europe’s chief financial officers (CFOs) had a far better winter than they expected. Six months ago, in the autumn survey, they feared the worst. The net balance for CFOs’ views of their companies’ financial prospects declined to –48%, not much higher than the all-time low recorded during the COVID-19 lockdowns. The Russian invasion of Ukraine in February 2022 had caused supply disruptions and soaring prices for many vital commodities. How Europe and, in particular, Germany was going to get through the winter – given its dependence on natural gas supplies from Russia – was unclear. Energy rationing, which would have blighted economic output, seemed probable.

But Europe has now got through its feared winter without shortages, thanks mainly to unusually mild weather and energy-saving measures. Economic activity has therefore held up better than expected. Labour markets have remained robust, or even tight. And firms are in much better shape than their own CFO outlooks had foreseen. But this is not to say that all is now rosy.

The continuing war and geopolitical risks in general, fears about the economic outlook, labour shortages and high inflation, and labour costs are very much on the mind of Europe’s CFOs in the spring of 2023. As this latest edition of the Deloitte CFO Survey shows, a majority of them do nonetheless foresee growth in their revenues, and they intend to hire more staff, though not on a major scale. Their optimism is cautious, tempered by a sense that uncertainty remains elevated, with geopolitical and economic risks persisting.

They also remain preoccupied by dealing with the serious difficulties that emerged in 2022. Europe’s CFOs are taking increasingly profound actions to make their supply chains more resilient, such as by using more digital tools rather than simply relying on increased inventories. As CFO priorities show, European firms are also planning to expand their footprint, mostly in western Europe and North America – not in regions in which they now tend to see greater risk.

From gloom to slight optimism

According to Deloitte’s European CFO Survey for Spring 2023, European firms have become far less anxious about their financial prospects than in the autumn and, on average, are mildly optimistic (figure 1). The net balance, the difference between the share of positive and negative responses, of CFOs feeling more confident about the financial prospects for their companies rebounded to +8% from the extremely gloomy –48% in autumn 2022. But the shift in mood is not all-encompassing: more than a quarter of firms remain pessimistic.

Business confidence in Europe has greatly improved because the winter disaster they expected did not happen. Russia’s invasion of Ukraine had provoked fears that heating for Europe’s homes and fuel for its factories might be limited during the winter. But the unusually mild weather conditions combined with more efficient use of energy and better energy supply than expected means that the much-feared rationing did not take place. Now Europe’s CFOs have turned to be more confident, but their optimism is tempered by a degree of caution.

Nor are all countries ready to embrace the somewhat better mood. Deep pessimism prevails in Norway (–32%), where consumers are reluctant to spend due to high inflation and interest rates, and CFOs worry about weaker growth. And in Sweden (–12%), Italy (–6%) and Turkey (–5%) too, CFOs’, on balance, continue to lack confidence in their companies’ financial prospects.

Automotive bounces back and retail lags

At the sector level (figure 2), the most remarkable development is the recovery of the automotive industry. In the autumn survey, automotive CFOs were still troubled, mainly by shortages of raw materials, in particular, semiconductors, and by the collapse of the Russian and Ukrainian markets. Some easing of input shortages and reopening of the Chinese economy have provoked a recovery, and the net balance of CFOs’ financial outlook in the automotive sector in the spring is +39%. CFOs in the retail industry, however, are concerned about consumers’ willingness to spend, with inflation, higher interest rates and soaring rental costs likely to be eating into household budgets, and the net balance for their level of confidence is –5%, the weakest of any sector.

Less inventories and more digitalisation to mitigate supply problems

Though supply chain concerns have become somewhat less severe in recent months they are still keeping CFOs busy. In this edition of the survey, as in the spring 2022 edition, CFOs were asked how they aim to mitigate their supply chain difficulties. Half the CFOs report that they are making increased use of digital planning tools, a considerable rise from one-third of respondents a year ago (figure 3). Increased digitalisation was the most widely used measure to improve supplies this time. Diversification of suppliers and distribution routes (40%), increased collaboration with suppliers (38%), and stress or scenario testing (34%) were the next most commonly used strategies. 

On the other hand, fewer survey participants seem to be relying on short-term reactions, such as increasing their inventories, than a year ago, probably because the economic situation has become less severe, and they have had more time and capacity to implement measures that will mitigate these issues in the medium to long term. Nor do European companies seem to be relocating their production on a major scale at present as the ‘re-evaluation/relocation of production locations’ option is favoured by just 13% of firms, unchanged from a year ago. All of this indicates that a transition is taking place, out of immediate crisis mitigation mode towards strategic, longer-term action.

Since only 11% of European firms report that they have not taken or are not planning to take any action, it is plain that CFOs are devoting time and effort to making their supply chains more dependable. And, in general, mitigating supply chain issues seems to be paying off because the companies whose CFOs reported that they have addressed the issue rate their financial prospects more optimistically than those that have not taken any action.

Geopolitical tensions affect investments flows

Most of Europe’s CFOs, 65% of those surveyed, continue to rate the level of external financial and economic uncertainty as being high, but this figure is considerably lower than the autumn’s 81%. The net balance, of +62%, is close to its historical average.

The generally quite high level of uncertainty reflects the diverse risk factors firms are facing. Currently, the economic outlook is rated as the main risk. Even if recession may be avoided in most countries, the economic situation remains fragile. The labour market has become somewhat less tight as the economy slows but the shortage of skilled labour remains one of the main risks CFOs need to deal with. Besides economic concerns, geopolitical risks continue to worry European companies’ CFOs.

As geopolitical tensions persist, almost half (+47%) of European firms are planning to expand their footprint in Western Europe and North America (+41%) (figure 4). North America might have become more attractive for European companies because of tax incentives arising from the Inflation Reduction Act (IRA). Africa, the rest of Asia and China are the least attractive locations for European companies at present, probably reflecting the difficulties with global supply chains and some of the measures taken by the Chinese government in relation to technology firms. Respondents reduced their footprint especially in China (14%) and in eastern Europe (12%).

Strategy focuses on cost reduction

Unsurprisingly, European companies expect inflation to remain high during the next 12 months, predicting a rate of 6.3% for the euro area one year ahead. Also 70% of CFOs rate the cost of credit now as either fairly costly (55%) or very costly (15%). It is clear that even if inflation has been softening lately, mainly due to lower energy prices, it remains elevated and higher interest rates have driven up financing costs.

Reflecting these higher costs, the main strategic priority of European financial executives has become cost reduction. Organic growth is a further strategic goal as non-organic growth has probably become more challenging given the weaker economy and many geopolitical threats.

Revenues, margins, and investment look up

Despite the many risks they see, Europe’s CFOs are more confident about their companies’ future key metrics than in the autumn survey (figure 5). Revenues are expected to increase strongly during the next 12 months, with more than 60% of those surveyed expecting higher revenues and only 19% expecting revenues to fall, resulting in a net balance of +44% and a considerable 26-percentage-point improvement from autumn. A net positive balance of +10% also see their operating margins improving – though the spring balance is not high, it represents a huge 48-percentage-point increase on the gloomy outlook CFOs had in the autumn.

Even though financing costs have gone up, 37% of Europe’s CFOs are planning to increase their capital expenditures over the next 12 months, whereas 24% are counting on a reduction, so that the net balance increased to +13% – a 32-percentage-point improvement from autumn. This implies that we should see somewhat higher investment in Europe in the near future. At the industry level, firms in energy, utilities and mining (net balance of +38%) and business and professional services (+36%) are aiming to increase their capital expenditures most, while retail companies (+4%), for which consumers’ inflation struggles are a dampener, and the construction sector (+4%), with interest rates hurting mortgage lending and property prices, are showing little sign of wanting to increase their investment spending.

Hiring looks set to pick up modestly

The rebound in firms’ outlook for their earnings and investments is also reflected in their hiring intentions. Although a majority of firms (46%) plan no change in staffing levels, a little over a third (35%) are planning to hire. The modest net balance of +16% of Europe’s CFOs planning to add employees reflects the fact that 19% of firms across Europe have staff-cuts in mind. Hiring intentions are strongest in the business and professional services (+52%) and then tourism and travel (+45%) sectors. The struggling retail sector is the laggard. It is the only sector expecting to reduce (–5%) its number of employees. The automotive sector is also behind most other sectors, planning to expand its hiring only minimally, by a net balance of +6%.

Conclusion: Moving forward cautiously

It has been a tumultuous few years for Europe. The first major war on European territory for almost 80 years exacerbated the impact of the first global pandemic in a century and presented CFOs with unexpected and extreme supply chain difficulties and commodity price increases. They expected a war-ravaged winter and came through it far better than they expected. The resultant relief is what this spring 2023 edition of the survey, above all, reflects.

Europe’s CFOs are now quite positive about their firms’ earnings prospects, and they do plan to increase their hiring and capital expenditure slightly. But they are still concerned about the economic outlook. Monetary policy has changed radically in the past year. Financing is far more expensive. Households are under fire from higher mortgage rates as well as a much higher cost of living. The housing market has turned. The retail sector is struggling. The worry is that other sectors, too, will fall victim to weakening demand, especially if business investment abates substantially in reaction to higher interest rates.

Nonetheless, European firms are not waiting passively for things to get better, but they are preparing their companies for future challenges. They are taking profound actions to mitigate supply chain frictions and rethinking the locations for their investment and activity against the backdrop of geopolitical tensions.

Like sailors, Europe’s CFOs will be keeping a close eye on the forecasts, political and economic ones, more than meteorological. They are unlikely to set sail on any bold new ventures until they feel confident that the world’s currently high economic and geopolitical risks have receded.

About the Deloitte European CFO Survey

Deloitte has conducted the European CFO survey since 2015, giving voice twice a year to senior financial executives from across Europe. The data for the spring 2023 edition were collected in March 2023 and reflect responses from 1,366 CFOs in 16 countries and across a wide range of industries.

The authors would like to thank all participating CFOs for their support in completing this survey. They would also like to thank the CFO Survey Teams in each of the countries that collected the data from local CFOs, and especially Dennis Brandes and Samuel Guenther, for their contributions in shaping the special questions.

Cover image by: Mark Milward

About the Deloitte CFO programme

Deloitte’s Chief Financial Officer (CFO) programme brings together a multidisciplinary team of Deloitte leaders and subject matter specialists to help CFOs stay ahead in the face of growing challenges and demands. The program harnesses our organisation’s broad capabilities to deliver forward-thinking and fresh insights for every stage of a CFO’s career – helping CFOs manage the complexities of their roles, tackle their company’s most compelling challenges and adapt to strategic shifts in the market.

Jose Manuel Dominguez Carravilla

Jose Manuel Dominguez Carravilla

CFO Programme Leader


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