The Deloitte CFO Survey Focus on cost control, no retreat from growth
The UK’s largest businesses enter 2018 more focussed on controlling costs than at any time in the last eight years. Although the UK is in the ninth year of recovery corporates seem to be reacting to slower UK growth and Brexit uncertainties with a renewed focus on costs.
Debapratim De Senior Economic Analyst 020 7303 0888 [email protected]
Despite December’s agreement between the UK and the EU to proceed to trade talks, CFOs’ concerns about Brexit have mounted. It tops the list of risks for businesses in 2018. Weak UK growth ranks as the second greatest risk facing businesses this year, with growing concern about productivity in third place. In a world of accelerating growth and buoyant equity markets domestic risks loom large for UK CFOs. Yet strikingly, a sharper focus on risk and cost control has not led to a collapse in business sentiment. CFOs are more optimistic today than they have been, on average, in the last couple of years. Perceptions of uncertainty are far lower than during the euro crisis in 2011-12 and following the EU referendum in 2016. Far from backing away from growing their businesses, as happened during previous periods of uncertainty, CFOs are putting increased weight on growth. The priority CFOs attach to expansion over the next 12 months, whether organically, through acquisitions, or introducing new products/services or moving into new markets, is at its highest level since we first asked this question in 2009. So why, in an environment where home-grown risks and cost control loom large, are CFOs still committed to growth?
Ian Stewart Chief Economist 020 7007 9386 [email protected]
For a business cost control counters the risk from weaker UK growth. But beyond these shores activity is accelerating and opportunities are increasing. 2017-2018 looks set to be the best two-year period for growth in Britain’s core export market, the EU, in ten years. Nor is it all doom and gloom at home. On average, economists see the UK economy growing this year in line with what the Office of Budget Responsibility sees as its trend rate. Some CFOs may anticipate an easing of Brexit risks, feel that their own business is less directly affected by Brexit or that they can mitigate the risks.
Alex Cole Economic Analyst 020 7007 2947 [email protected]
Rebecca Porter Economic Analyst 020 7007 5728 [email protected]
Tom Simmons Economic Analyst 020 7303 7370 [email protected]
Key contacts Ian Stewart Chief Economist 020 7007 9386 [email protected]
The backwash from Brexit is the dominant theme for UK corporates as they enter 2018. But it has not crushed the animal spirits of the business sector nor forced a retreat from expansion. The central challenge for UK business will be to achieve growth in an environment of stringent cost-control.
Richard Muschamp CFO Programme Leader 020 7007 0724 [email protected]
For current and past copies of the survey, historical data and coverage of the survey in the media and elsewhere, please visit: www.deloitte.co.uk/cfosurvey
Chart 1. Risk to business posed by the following factors
Weighted average ratings on a scale of 0-100 where 0 stands for no risk and 100 stands for the highest possible risk 62
Eﬀects of Brexit
Weak demand in the UK
Poor productivity/weak competitiveness in the UK economy
The prospect of further rate rises and a general tightening of monetary conditions in the UK and US
A bubble in housing and/or other real and ﬁnancial assets and the risk of higher inﬂation 35 2017 Q4
47 45 40
2017 Q3 1
The Deloitte CFO Survey Q4 2017 | Focus on