The FDs’ FD: grim sentiments bottom out

The results of Deloitte’s latest quarterly survey of CFOs and FDs of major UK
companies suggest that perhaps for the first time in 18 months, and certainly
compared with the latter half of 2008, CFOs are feeling marginally back in
control. So, does this mean that confidence is beginning to be restored?

Don’t get me wrong ­ I would definitely not claim that we had seen any ’green
shoots’. I’m far too old and jaded to fall for that one. However, while this
quarter’s findings are still downbeat, they do give the first improvement in
sentiment since September 2007. Credit conditions remain tough, but during the
last three months overall credit pricing and availability have improved a
little. Moreover, while the majority of FDs remain negative on the financial
outlook for their business, sentiment has picked up from the extreme lows seen
in the previous two quarters.

Maybe this response reflects the fact that most FDs have taken action to help
mitigate the consequences of the recession. Cost-cutting measures are now almost
universal. A total of 95% of those surveyed are cutting discretionary spend and,
disappointingly but not surprisingly, 81% are cutting employee numbers and
curbing capital expenditure. And, as we have witnessed in recent weeks, FDs are
now more willing to cut the dividend or even issue new equity if this helps to
restore a company’s balance sheet.

So, do these results really show FDs are feeling more confident and back in
control? I think this is a very big assertion at this point in the economic

At a dinner with 12 FTSE150 FDs two weeks ago, all agreed that their biggest
challenge is ‘volatility’. Not just volatility in share price, but volatility in
just about every aspect of commerce. This makes business and financial planning
incredibly difficult ­ if not impossible ­for many companies, which is very
frustrating, because many FDs are now keen to plan ahead to ensure their
companies are best positioned to take advantage of the opportunities that the
current and future environment present.

Until we enter a more stable period, where volatility does not feature so
strongly, it is unlikely that FDs will have real confidence and believe they are
back in control.

Margaret Ewing is a partner and vice-chairman at
Deloitte and former CFO of BAA

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