'The world is going shopping' - overseas

FINANCE DIRECTORS still have raw memories of the credit crunch and are unwilling to build up debt to finance their growth plans. Instead, thanks to record cash preservation levels they are using their cash to invest.

The recent publication of this year’s CFO Survey by American Express and CFO Research Services has shown the global business community once again, what many have suspected for sometime – corporate debt is out of favour and spending on R&D is in.

With markets showing signs of recovery and new business opportunities looking more positive than they have done for some time, there is a definite trend among the 665 financial directors polled, that they are investing in new products and services to gain traction – and in particular are looking to acquire market share.

In the UK, the statistics show a definite direction for our businesses, as 61% of finance directors are planning to use cash reserves aggressively for acquisition. This is a positive sign that firms, many of whom have built up substantial cash piles as they retrenched during the recession, are looking to spend again.

However, this positive attitude seems at odds with the more general mood amongst the FD community. In the UK, only 56% of UK finance executives anticipate economic expansion in the next year, in marked contrast to last year when 71% held this view.

When it came to their own firms however, things were more upbeat, with 61% expecting top-line growth, including nine per cent who expect substantial, as opposed to modest, revenue growth.

So what does this suggest about growth plans? With companies confident in themselves but cautious of their domestic market it seems likely that there is significant interest in cross border investment and growth activities. The survey showed that when it comes to M&A activity, the world is going shopping.

Even amongst the more muted backdrop of the UK, 61% said they would aggressively pursue M&A activity, 69% of FD’s will increase capital spending and 67% will use their cash to hire new staff and expand operations.

Taken together, these figures present a new trend for UK plc, with our financial directors looking overseas to secure their growth, eyeing both established markets and the emerging BRIC powerhouses.

Given the economic storm we’ve weathered in recent years you might think boards and shareholders would remain focused solely focused on the more controlled markets that they know – but instead we’re seeing significant interest in emerging markets.

CFOs know that the opportunities for growth have to be balanced between the desire for expansion and exposure to new, potentially untried territories and it will be interesting to see how these plans for increased expenditure turn out.

Investments by firms and increasing levels of confidence are good news but the lower confidence in the performance of our own economy suggests it will be a long, but steady, walk to recovery.

Katrina Cliffe is Vice President and General Manager of Commercial Card at American Express UK