CFO’s are not expecting business demand to “return to normal” until after the second quarter of next year, according to the latest CFO survey from Deloitte.
The survey found that almost two-thirds (62%) of CFOs share the sentiment, up from just under half (49%) in Q2’s survey.
A total of 102 CFOs participated in the latest survey, including CFOs of 21 FTSE 100 and 37 FTSE 250 companies. The combined market value of the UK-listed companies that participated was £417bn, approximately 20% of the UK quoted equity market.
It also found that perceptions of external uncertainty remain elevated and well above levels seen before the pandemic, with the majority of CFOs surveyed (79%) feeling there is a “high or very high level of uncertainty facing their business”, in line with Q2 (80%).
However, the majority of CFOs surveyed said they expect to keep the “vast majority” of furloughed employees on their payrolls. They expect to retain, on average, 82% of their furloughed staff after the scheme ends in October.
Almost two-thirds (63%) of CFOs expect inflation to remain between 0.1 – 0.5% over the next two years, up from 39% in Q2. Over half of finance leaders (57%) also expect the base rate to be maintained at 0.1% this time next year, with only 6% anticipating negative interest rates in a year’s time.
In addition, over three-quarters of finance leaders (78%) said they expect UK corporates to reduce capital expenditure in the next 12 months, maintaining the sentiment seen in Q2, where the majority (86%) anticipated a decrease.
The pandemic has meant businesses have made greater investment in some areas, like technology, while reducing it in others.
A net balance of 64% of CFOs said they expect to reduce their land, business buildings and workspace infrastructure investments, while 65% added they expect to increase investment in organisation and business process improvements, such as restructuring, streamlining and automation, over the year ahead.
Ian Stewart, chief economist at Deloitte, said: “Business leaders expect a longer haul back to pre-Covid levels of activity. With further restrictions coming into effect, businesses have scaled back expectations and are focussed on strengthening their businesses and their balance sheets.
“British businesses are gearing up for a long winter with COVID-19, with a full recovery on the horizon only after next summer.”