UK finance chiefs brace for fastest cost rises in four years, Deloitte finds

UK finance leaders expect operating costs to rise at the fastest pace in more than four years, according to Deloitte’s latest Chief Financial Officers (CFO) survey.

The quarterly poll, conducted between 17 and 30 September, found that a net 84% of respondents anticipate higher costs over the next 12 months. The findings suggest growing pressure on margins and continued caution among senior finance executives.

Concerns about geopolitical risks have eased slightly, while anxiety over the UK’s productivity and competitiveness has reached its highest level since Deloitte began tracking the issue in 2014. Both areas now rank jointly as the top perceived risks, each with a weighted average score of 62.

Nearly half of respondents – a net 47% – expect operating margins to decline in the coming year, compared with 57% in the second quarter of 2023. CFOs also reported a modest uptick in wage growth, with average pay at their organisations rising 3.5% over the past year.

Finance leaders now expect inflation to stand at 3.2% in a year’s time, up from 2.4% a year earlier.

Deloitte said cost reduction and cash control remain the top strategic priorities for CFOs. Expansionary plans have fallen further down the agenda, with fewer executives citing investment in new products or services (25%), capital expenditure (12%) or acquisitions (11%) as strong priorities.

With the exception of the early months of the pandemic, the proportion of CFOs prioritising acquisitions is now at its lowest level since at least 2010.

Ian Stewart, chief economist at Deloitte UK, said: “The focus for CFOs has shifted, with geopolitical anxieties, a dominant concern for some time, moderating in the wake of a series of US trade deals. 

“Domestic challenges have moved centre stage, with costs rising and mounting concerns about UK competitiveness. CFOs have responded by strengthening balance sheets through a focus on cost control, building cash reserves, and reducing debt.”