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Price pressures and rising interest rates have hit the confidence of finance chiefs at UK firms in the second quarter, a survey from Deloitte showed on Monday.
The Deloitte CFO Survey - conducted between June 15 and June 27 - showed that only 10% of chief financial officers are more optimistic about the current financial prospects for their firm compared with three months ago, down from 25% in the first quarter. The survey sampled 69 CFOs, including those of 13 FTSE 100 companies and 21 FTSE 250 companies.
According to the survey, almost half of respondents, 45%, said the levels of external economic uncertainty they are facing is high or very high, up from 39% in the first quarter.
The top danger for businesses is tighter monetary policy, survey respondents said, eclipsing concerns over geopolitics and energy costs which Deloitte said had been the dominant concerns over the past two years. Labour and supply shortages have become less of a worry, the survey found, thanks to easing recruitment difficulties and supply chain pressures.
CFO expectations for inflation in two years time have risen to 3.6% in the second quarter, from 2.9% in the first quarter, while interest rate expectations for the Bank of England have reached 4.5% for a year’s time, compared to 3.8% last quarter.
CFOs are placing ‘greater emphasis’ on cost cuts and cash flow generation. The survey found 55% see cutting costs as a ‘strong priority for their business in the next 12 months’, while 46% see increasing cash flow as a priority.
Deloitte partner and chief economist Ian Stewart said: ‘The burst of business optimism seen in the spring has faded under the weight of inflation and rising interest rates. Corporates have responded with an increasing focus on cost reduction and cash control.
‘Businesses have negotiated a series of major challenges in the last four years, including the UK‘s departure from the EU, the pandemic and supply shortages. The legacy of those earlier shocks, in the form of inflation and high interest rates, is now the central challenge.’
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