In its latest quarterly survey of UK CFOs (chief financial officers), entitled ‘Turning The Corner’, business advisory group Deloitte paints a picture of the UK corporate scene which will be music to investors’ ears.

Optimism among the UK’s largest businesses is running at well above average levels, ‘suggesting the worst of the economic downturn is behind us’ says the survey.

Not only is sentiment well above its long-term average, it is at the same levels which preceded periods of good growth in 2010, 2014 and 2021.

Moreover, for the first time in three years CFOs expect average corporate profit margins to increase over the next 12 months.

‘The uncertainties which have clouded the business scene for much of the last eight years, driven by Brexit, domestic politics, COVID and, in recent years, inflation, seem to be clearing. CFOs’ perceptions of external risk facing their businesses have dropped to a two-and-a-half-year low’, say the survey’s authors.

‘Our uncertainty index is running at less than half the peak seen in autumn 2022 in the wake of Russia’s invasion of Ukraine as inflation gathered pace.’

Even worries over the exceptionally-high levels of inflation which had dominated CFO thinking since late 2021 seem to be drawing to an end.

One by one, ‘concerns about inflation, energy supply, labour shortages and interest rates have dropped down CFOs’ list of worries’, finds the report.

At the same time, finance officers say credit conditions have improved in the last six months with credit now reported to be more available than at any time in the last two years.

Expectations for the general economy have also improved, with inflation seen at 2.9% a year from now and 2.3% in two years’ time, not far above the Bank of England’s official 2% target.

The bank base rate is expected to fall by 100 basis points or one percentage point to 4.25% in a year’s time, an improvement of 50 basis points since the last survey.

There are of course still a few areas of concern, with geopolitics seen as the biggest business risk over the next 12 months and specifically a rise in cyber-attacks which are becoming increasingly frequent.

Next on the list of concerns are a fall-off in demand and higher energy prices or disruption to energy supplies as a result of geopolitics.

In terms of their own businesses, CFOs say their priorities for the next 12 months are controlling costs and building up cash, with increased capital spending or the launch of new products and services ‘on the back burner’ for now. 

‹ Previous2024-04-11Next ›