CFO confidence lowest since Lehman collapse

OPTIMISM among UK finance directors has fallen for the second successive quarter and has now reached levels not seen since the collapse of Lehman Brothers in 2008.

The conclusions come from the Deloitte CFO survey and its latest set of quarterly results. The figures reveal that, on average, CFOs see a 33% chance of a double-dip recession.

However, CFOs still have expansion by acquisition as a priority as well as launching new products and services.

Deloitte vice-chairman Margaret Ewing said: “The continued squeeze on UK consumer spending power seems to be weighing on corporate sentiment. Over the last year, real disposable incomes have fallen by 2.7%, the fastest rate of decline since 1976.

“The mood of caution is reflected in a tilt in the balance sheet strategies employed by finance chiefs. CFOs are placing more emphasis on cost control and increasing cash flow than at any other time in the last year.”

The survey found more appetite for risk among CFOs in companies with operations overseas that are more likely to be focused on expansion.

It found an emphatic split between companies: those with over 70% of revenues from overseas are focused on new products or growing by acquisition. Those with most of their revenue coming from the UK remain concentrated on cost reduction and increasing cash flow.

Ian Stewart, Deloitte’s chief economist, said that the dominant view among CFOs was that margins are set to narrow. However, the increased caution had not dented the appetite for many to take risks.

“Risk appetite remains close to the three-and-half year high seen last quarter, which seems to reflect the strength of corporate balance sheets, the availability of capital at a relatively low cost and, a perception that, while uncertainties abound, the current environment also presents opportunities for profitable growth.”