BY Fraser Tennant
Uncertainty over domestic policy as well as foreign economic and geopolitical risks are the biggest challenges facing the UK’s largest companies in 2015, according to a survey of chief financial officers (CFOs) carried out by Deloitte.
The survey, which features the views of 119 CFOs of FTSE 350 and other large private UK companies, also shows that, despite uncertainties, CFOs are confident as to the prospects for UK growth and business investment in 2015, with their businesses expected to see earnings rise by 2.9 percent.
Carried out between 27 November and 15 December, Deloitte’s Q4 2014 CFO Survey highlights that: (i) 56 percent of CFOs say that now is a good time to take greater risk onto their balance sheets, down from a record reading of 71 percent in Q3 2014 but still well above the long-term average; (ii) 60 percent of CFOs enter 2015 with above normal, high or very high levels of uncertainty facing their businesses, up from a low of 49 percent in Q2 2014 but at the same level seen 12 months ago; and (iii) 88 percent of CFOs rate the UK as a “good” or “excellent” place to do business, with a quarter placing it in the top-tier of industrialised economies.
“The central challenges facing the UK’s largest companies as they enter 2015 are policy uncertainty at home and economic and geopolitical risks overseas," said Ian Stewart, chief economist at Deloitte. “Rising levels of uncertainty have caused a weakening of corporate risk appetite which, nonetheless, remains well above the long-term average.
“Concerns about policy change after May’s General Election have risen significantly and this is seen as the biggest risk facing UK business in 2015. Deflation and weakness in the euro area is a growing concern and is now the second greatest business risk, followed by a UK referendum on EU membership and by emerging market weakness.
“This marks a big shift in thinking. Going into each year, from 2008 to 2013, CFOs’ main concern was the state of the UK economy. Now the risks are seen as lying elsewhere.”
The Deloitte Q4 2014 CFO Survey is the 30th quarterly analysis of CFOs of major UK companies. It is the only survey concerning valuations, risk and financing which seeks the views of major financial players in the UK.
Report: The Deloitte CFO Survey: 2014 Q4
