'Spend less' plan for UK CFOs as Brexit concern weighs heavy

MOST UK chief financial officers are worried about financial and economic business prospects, as more become risk-averse with few planning to invest because of Brexit negotiations, new research has found.

The findings compares to just under half of CFOs in Russia reporting business uncertainty, a decline from 72% in the first quarter 2016, according to Deloitte’s latest European CFO survey. It reveals the contrasting impact that finance chiefs in different European countries expect as a result of Brexit and the US presidential vote for Donald Trump.

Of all European CFOs interviewed, the UK had the fewest number of finance chiefs (46%) forecasting revenues to rise in the next 12 months. This compares to 83% of Polish CFOs expecting growth and 65% of 1,148 CFOs interviewed across 17 European countries.

UK CFOs also came out the least committed to spending with just 7% planning to increase capital expenditure. This compares to 75% of Irish finance chiefs planning to boost spending. Overall, less than a third plan to increase capex.

The results are similar for recruitment investment too, according to the survey, with just 9% of UK finance chiefs willing to increase jobs.

Brexit complexity

As regards the impact that Brexit would have on their countries, CFOs in 14 regions (excluding the UK) were most worried about complexity and regulation. Restrictions in workforce mobility and decreased export opportunities due to non-tariff barriers were also concerns for them.

CFOs in three-quarters of the 17 countries in the study said that a defensive measure was their top priority for the coming year. In 11 countries, finance chiefs said cost control as their main concern.

“Brexit features prominently among these shocks, with over one-third of Europe’s CFOs saying the negotiations on the UK leaving the EU will have a negative impact on their business,” said David Sproul, senior partner and chief executive at Deloitte UK.

Geopolitical concerns

Sproul said Brexit was not the only major geopolitical concern in Europe.

“Political uncertainties of varying degrees, from Spain to Turkey, upcoming elections in France and Germany and now, of course, the outcome of the US elections, weigh on the minds of business leaders,” Sproul added.

European GDP growth is forecast to be 1.6% this year, the third consecutive year of growth for Europe. This year UK growth is expected to be 2%, which could be the fastest rate in the G7 group of economies. But next year UK growth could fall to around 1.2%.

“Despite a challenging business environment, CFOs are confident that their business can cope and grow revenues over the next 12 months. In part this is down to businesses becoming more accustomed to uncertainty and more used to managing it,” said Ian Stewart, chief economist at Deloitte UK.