UK corporates see reasons to be cheerful – Deloitte
UK corporates have entered 2013 in a more optimistic mood than they entered 2012, according to the latest Deloitte CFO Survey.
But while sentiment has seen a positive shift, the strategies of large UK businesses haven’t significantly changed.
While the primary concern for corporates a year ago was that the single currency could break up, such fears have receded. Optimism is up sharply from the lows seen at the end of 2011, and fears of a return to recession or a Euro breakup, have eased. The probability of a euro break-up within the next 12 months is rated at 22% compared to 37% a year ago.
The Q4 Deloitte CFO Survey gauged the views of chief financial officers (CFOs) and finance directors from 112 major companies, including 36 FTSE 100 and 38 FTSE 250 businesses, about the appropriateness of UK Government policy for business.
Monetary policy, which includes interest rates, inflation and the availability of credit, received the strongest vote of confidence, with a net 81% of finance chiefs rating it as appropriate.
CFOs are also far less worried about company-specific worries such as margins, cashflow and credit availability. Large companies enter 2013 with healthy balance sheets and benign financing conditions. In Q4 2012 CFOs reported a sharp decline in credit costs and now rate credit as being cheaper than at any time in the last five years. Just 4% of CFOs and finance directors surveyed cited the cost of and difficulty in raising finance as being major worries for their businesses.
Chris Robertson, partner at Deloitte in the West Midlands, said: “Despite expectations of a weak recovery in 2013 large companies enter the New Year with a greater focus on cost control and cash flow than at any time in the last two years.
“The emerging picture is of businesses which are constrained by low growth and uncertainty rather than weakness in business models or access to capital.
Despite confidence fluctuating with the ups and downs in economic prospects, we’ve seen a long term drift to greater defensiveness by corporates not for want of capital but rather for scarcity of opportunity.
“The dominant concern of UK businesses for 2013 is the economy, just as it has been at the start of each of the last four years. Confidence has returned, but perceptions of economic and financial uncertainty remain high and the greatest worries for CFOs are still the weakness of the euro area and UK economies.”
