Businesses Looking To Expand Again Post-Credit Crunch - Deloitte Survey

Stephen Little

10 July 2013

After a period of cost-cutting and debt reduction following the global financial crisis, chief financial officers of big businesses are shifting towards expansionary strategies and are more willing than ever to take on risk, according to a new survey by Deloitte.

The Deloitte CFO Survey for second quarter interviewed 135 CFOs, including 37 from FTSE 100 companies and 45 from FTSE 250 companies, and showed that CFOs’ expectations for hiring, investment and discretionary spending have returned to levels last seen in early 2011.

Nearly half (45 per cent) of CFOs say that it is now a good time to take risk onto their balance sheets, the highest in six years and more than double the level of a year ago.

They have also softened their focus on cost reduction to the lowest level in two years, with 34 per cent of CFOs saying reducing costs is a priority for their business, down from 42 per cent in the first quarter of 2013.

“Expansion is back of the agenda for many businesses, with expectations for hiring and investment back to levels not seen since early 2011 when the world seemed set for recovery. CFOs’ willingness to take risk on to their balance sheets has risen to the highest level we have ever recorded. The recession-era focus on cost-cutting and debt reduction is easing," said Ian Stewart, chief economist at Deloitte.

Deloitee said that UK-facing businesses are more expansionary than at any point in the last two years and CFOs see fewer risks to their business in the economy.

The survey revealed that a net 53 per cent of CFOs saw credit as cheap and a net 56 per cent saw credit as easily available.

Perceived risk has also fallen dramatically, with 73 per cent of CFOs believing their businesses face an above normal, high or very high level of external macroeconomic uncertainty, down from a peak of 97 per cent in late 2011.

“Business optimism has been improving for some time but our latest survey shows that CFOs are translating this confidence into action. Rising risk appetite and a shift towards expansion show that large UK corporates are increasingly planning for growth," said Stewart.

Confidence in the prospects of the euro and the UK economy has also increased.

CFOs rated the chance of a breakup of the euro area at 9 per cent, down from 36 per cent a year ago, and those that believed the UK could experience a recession in the next two years dropped from 47 percent to 23 per cent.