Concerns over Brexit among chief financial officers have reached the highest level since the European Union referendum in 2016, new research has found.
Eight in 10 CFOs surveyed by Deloitte expect the long-term business environment to be worse as a result of the UK leaving the EU.
The survey showed that pessimism about the short-term effects of Brexit remains high: 49% of CFOs expect to reduce their own capital expenditure and 22% to cut mergers and acquisitions because of Brexit. More than half (53%) of CFOs also expect to reduce hiring as a result of Brexit – the highest level in more than two years.
Of those surveyed, 13% said they are more optimistic about the prospects for their company than they were three months ago, compared with 10% in the fourth quarter of 2018. In addition, 9% of CFOs now agree it is a good time to be taking greater risk on to their balance sheets, up from 7% last quarter.
Growing economic headwinds means CFOs are more negative on revenue growth – half of them now expect a decline in revenues in the next 12 months, up from 18% at the same time last year.
Cost pressures have also increased: a record 79% of CFOs expect operating costs to rise in the next year. Meanwhile, CFOs report that credit pricing and availability have deteriorated in the last two years. Almost one-fifth (18%) now report that credit is hard to get, up from 4% two years ago. Furthermore, 9% report credit as costly, up from 3% over the same period.
Ian Stewart, chief economist at Deloitte, said: “Put mildly, it’s been a turbulent few weeks, and there’s been little change in confidence and risk appetite among CFOs, as many priced in a tougher environment at the start of the year. They went into March braced for tough times and the latest round of Brexit uncertainties have not materially changed that picture. When expectations are already low, it’s harder to be disappointed.”
David Sproul, senior partner and chief executive of Deloitte North West Europe, added: “While last week’s announcement on a further deferral of the UK’s departure from the EU removes an immediate unknown, the continuation of uncertainty is causing much frustration for UK businesses. As well as stashing cash, many continue to delay investment. Businesses remain in a period of further limbo.”
A total of 89 CFOs participated in the survey, including CFOs of 48 FTSE 100 and FTSE 250 companies. The total market value of the listed companies that participated is £377bn. The survey ran between 26 March and 7 April.