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CFO confidence at lowest ever level, says Deloitte

The chief financial officers among the UK’s largest businesses expect their revenues to be 22% lower, on average, than their pre-Covid predictions, according to the latest CFO survey from Deloitte

This decline is four times as great as the 5.4% contraction in UK GDP forecast and “testifies to the intense pressure” on the revenues of major businesses. 

According to its latest survey, Deloitte found that confidence among CFOs also fell to its lowest ever level, “well below” the confidence at the height of the financial crisis in 2008.

Only 16% of executives are more optimistic about the prospects for their company than they were three months ago. Meanwhile, nine out of 10 finance directors believed there was a “high or very high” level of uncertainty facing their business.

Only 10% of CFOs believe demand for their business will fully recover this year, and 94% expect a fall in revenues. 

The first-quarter survey gauged the sentiment and confidence of 104 CFOs at some of the largest UK firms, including FTSE350 companies. It took place between 8 April and 22 April, after the UK was placed into lockdown on 23 March.

The survey recorded the lowest business confidence reading since it first launched in 2007, in stark contrast to the final quarter of 2019, when the survey recorded a record high level of confidence amongst CFOs.

Deloitte also noted that CFOs have reacted to the pandemic shock with a “decisive shift from growth to strengthening balance sheets”, with 94% of respondents unwilling to take risk on their balance sheets. 

It added that businesses have “never adopted a more defensive stance”, with an “unprecedented” focus on cost control, cash conservation, selling assets and debt reduction or deleveraging. 

In light of this, 98% of CFOs expect UK business to reduce their capital spending during 2020, with the same percentage anticipating a slowdown in hiring.

Ian Stewart, chief economist at Deloitte, said: “The COVID-19 pandemic has seen business confidence drop from an all-time high to an all-time low in just one quarter. 

“While there is no expectation from CFOs of a quick snap back in activity in the second half of the year, there is reassurance that the economic shock has emanated from outside the financial world, which will impact the rate of recovery.”

Richard Houston, senior partner and chief executive of Deloitte North and South Europe, said: “It is clear that the COVID-19 pandemic is having a major impact on the economy, presenting businesses with unprecedented challenges. 

“However, it is encouraging to see firms taking actions to future-proof their businesses such as diversifying supply chains and putting a greater focus on pandemic planning.” 

He added: “We are also seeing businesses learning from the new ways in which they are working. 

“As the world enters a ‘new normal’, 98% of financial leaders are predicting a rise in flexible working which could offer new opportunities for innovation and collaboration.”

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