Deloitte CFO survey: UK corporates concerned about political as well as economic
Appetite for financial risk is running at levels last seen in early 2008. Deloitte CFO survey: UK corporates concerned about political as well as economic risks

Fuente:    Fecha:  16.04.2010

Optimism among UK CFOs declined in the first quarter of 2010 despite improving credit and financial conditions, according to the latest Deloitte CFO Survey, the only survey of major corporate users of capital gauging attitudes to financing, risk and valuations. The modest decline in optimism comes against a backdrop of economic and political uncertainty, even though CFOs say that their companies have, on balance, performed better than expected so far this year.

CFOs remain cautious about the recovery with 82% expecting a sluggish, but sustained recovery. The average CFO sees a one in three chance of the UK economy suffering a double dip in this cycle. This quarter’s special questions reveal that CFOs believe UK corporates face political as well as economic risks.

The majority of CFOs polled believe that a hung parliament would have a negative impact on their business and for the economy. 93% think it would be bad news for the economy, with 37% believing it would have a significantly negative effect.

There is a clear and strong consensus among CFOs as to the next government’s key priority. 85% say that reducing the public sector deficit should be the top economic priority. The words of one CFO sum up the general tenor of the advice: ‘Cut public spending and stimulate activity by reducing taxation, both corporate and personal’.

Margaret Ewing, Deloitte partner and vice chairman, comments: “The good news this quarter is that the financial environment for larger corporates continues to improve, with credit availability returning to pre-recessionary levels. This isn’t to say that financing conditions for corporates are back to those experienced prior to mid 2007. Even among the larger quoted companies, most continue to rate credit as ‘hard to get’ and ‘costly’.

“What emerges from these findings is that financing conditions for larger companies are slowly improving. However, that still leaves corporates with plenty to worry about in terms of the pace of the recovery and the election. CFO sentiment appears to be consistent with the current general mood of uncertainty about the pace of UK recovery and speculation that the General Election may deliver a hung parliament.”

With credit supply improving, bank borrowing is starting to regain popularity as a source of funding. Lending from banks is at its most attractive since the Deloitte CFO Survey began in the third quarter of 2007. Crucially, for the first time since the survey began, all three forms of external finance – bank borrowing, equity and bond issuance - are rated as attractive by a balance of CFOs.

Ian Stewart, Deloitte chief economist, added: “CFOs have significantly reduced the level of balance sheet financial risk over the past year, but this process seems to be drawing to a close. CFOs are becoming more willing to take risk on to their balance sheets, more so than at any time since the recession started. This recovery in corporate risk appetite mirrors the behaviour of financial markets where risky assets, such as equities, have outperformed safe assets such as gilts and cash.

“CFOs remain positive about the prospects for corporate activity. The great majority expect M&A activity to increase over the next year and a clear majority also see private equity activity increasing.”