The confidence of finance chiefs at the UK’s largest companies has risen sharply, with the Deloitte survey of CFOs showing that sentiment has rebounded as concerns about energy prices and Brexit have eased. The survey showed that 25% of CFOs felt better about the future compared to 17% three months ago. This is the sharpest rise in confidence since the Covid vaccine rollout. The Deloitte survey was conducted from 21 March to 3 April, which was in the aftermath of the collapse of Silicon Valley Bank in the US and the forced merger of Credit Suisse with UBS. Despite concerns, the CFOs reported only modest changes to the cost and availability of credit.
Ian Stewart, chief economist at Deloitte, attributed the bounce back to improvements on several fronts at once. He said, “Since the beginning of the year, energy prices have fallen, inflation looks to have peaked, relations with the EU have improved since the Windsor framework and there has been a period of comparative political calm after the turmoil of last year.”
However, CFOs are still feeling risk averse, with many saying their priorities are cutting costs and building up cash reserves. This is a disappointment to the government, which is keen for businesses to invest now to spur future economic growth. One exception to that is investment in artificial intelligence. Deloitte found that an overwhelming majority of CFOs expect to see significant growth in spending on AI over the next five years but were divided on whether that would lead to an increase or decrease in the number of employees.
The UK economy has been struggling recently due to high gas prices, rising interest rates and a sluggish trade performance. Business investment has also been weak. Last week, the International Monetary Fund said Britain would be one of the worst-performing major economies in the world this year, shrinking by 0.3%. However, this prediction is slightly better than its previous expectation of a 0.6% contraction, made in January. A separate forecast published by the EY Item Club on Monday found that the UK is now expected to grow by 0.2% this year, up from a previously forecast contraction of 0.7%.
Hywel Ball, EY’s UK chair, said the economy “seems to be turning a corner, albeit very slowly” but added that the challenges “haven’t gone away overnight”. “Inflation is still in double-digits and energy prices remain historically high… However, perceptions matter and the fact the economy has been able to outperform expectations could help stir a revival in business and consumer confidence.” The UK CFOs surveyed are mainly from large companies, often part of global operations, and there is often a disconnect between their experience and that of smaller companies, which have seen a sharp rise in insolvencies.
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