CFO survey: UK business leader confidence hits all-time high

• Optimism among UK Chief Financial Officers jumps to the highest level since the survey began
• Brexit drops to 8th place on the risk list for British businesses
• UK business leaders expect the bulk of their workforce to return by September 2021
• UK Consumer Confidence rising alongside business leader optimism

According to Deloitte’s latest Chief Financial Officers (CFO) survey, UK businesses leader confidence has soared to the highest level in its 13-year history.

After slumping to a record low in 2020 due to the impact of COVID-19 lockdown restrictions and pandemic uncertainty, Deloitte revealed that CFOs are far more optimistic about their business prospects in the first three months of 2021 than ever before.

The planned reopening of the UK economy, Britain’s world-leading vaccination programme and hopes for less Brexit disruption appear to be fuelling business optimism. 

According to the CFO survey, Brexit concerns have fallen significantly lower on CFO’s risk list, from first or second place to eighth.

While new Brexit trade rules continue to be a thorn in the side for many UK exporters, only 3% of British business leaders expect post-Brexit trade disruption to persist until 2022.

Meanwhile, almost 60% of senior financial executives said that demand for their firm’s services and products had already returned to pre-pandemic levels or will do so by year-end.

As a result of the more optimistic outlook, corporate risk appetite is increasing. British businesses are shying away from defensive strategies such as reducing leverage and costs, which fast became a priority following the Brexit referendum.

Outlook for corporate spending and hiring improves

Expectations for hiring and investment have also jumped to six-year highs, and most CFOs expect to bring back the bulk of their workforce to the office by September 2021. 

Deloitte’s chief economist, Ian Stewart, said, “after four years of heightened uncertainty stemming from Brexit-related risks, the effects of the UK’s departure from the EU are now fading.”

Mr Stewart added: “Britain’s rapid vaccine rollout and the improving global economic backdrop is also turbo-charging business optimism.”

Some chief financial officers also commented on the brightening outlook for the US economy, which they believe could spark a robust global economic recovery.

With the UK emerging out of its sharpest economic downturn in three centuries, British firms are focused significantly on recovery and growth.

Comments from economists, including Bank of England (BoE) Chief Economist Andy Haldane, about pent-up consumer demand being unleashed as national lockdown restrictions are eased have added to the brightening backdrop and optimism.

Many UK firms anticipate strong quarters in Q3 and Q4 2021 as economic activity begins to pick up and the country returns to some normality.

According to Deloitte, 46% of survey respondents said they rate external financial and economic uncertainty as high or very high – notably lower than the 71% recorded in Q4 2020.

Key findings of the CFO survey

• UK business leaders less focused on defensive strategies and more focused on expansion as the prospective reopening of the economy remains on track
• CFO expectations for hiring and expenditure surge to six-year highs, supported by Britain’s progressive vaccination rollout and improved credit conditions
• Brexit no longer perceived as the top risk to business activity and productivity
• CFO inflation expectations are steadily rising – up to 81% of British financial officers expect inflation to climb above 1.5% over the next two years, up from 59% the previous quarter
• Nearly 50% of those surveyed hope to bring remote working employees back to the office in Q3 2021

Deloitte’s CFO survey of 100 CFOs across the UK’s equity market, including 21 firms listed on the FTSE 100 Index and 42 companies on the FTSE 250 Index, was conducted between March 17th and March 29th.

Deloitte’s publication precedes CNBC’s Global CFO Council Q1 2021 survey, which found that confidence levels among CFOs across the globe peaked at two-year highs.

Global CFO Council survey also reveals improved optimism

According to CNBC, global business leader confidence has jumped to its highest levels since 2018 as concerns over the coronavirus pandemic’s impact on their business outlook fades.

CNBC’s survey revealed that CFOs of major corporations are betting on a solid recovery for 2021 and expect cybersecurity to be a greater risk to their business than COVID-19.

Many have cited the global vaccine rollout and stimulus injections from central governments and monetary authorities as the reason for renewed optimism.

Growing consumer confidence is also adding to the more optimistic outlook. In the UK, GfK’s Consumer Confidence report revealed that sentiment surged to pre-pandemic levels in March.

GfK’s consumer confidence index rose by seven points last month to -16 against consensus expectations of a three-point jump – fuelling hopes of a spending boom in the second half of the year.

However, economists have said that while growth prospects are improving, the critical question remains how big of a rebound to expect when economic conditions vary from region to region.

Conference Board Chief Economist Erik Lundh said: “What kind of recovery will we see in various parts of the world is the bigger question, and as challenging to answer as to how bad things would get in 2020.” 

Even as UK consumer confidence and business sentiment improves, the Federation of Small Businesses (FBS) revealed that one in seven British companies expect to make some or all workers redundant this quarter.