UK CFO confidence takes a sharp turn upwardFinance leaders in a UK survey are far more optimistic about the prospects of their organisation than they were at the beginning of the year.
CFO optimism in the UK has increased since the start of the year, a change bolstered by a decline in energy prices and a brighter inflation outlook, a new quarterly report shows.
A net 25% of finance leaders in Deloitte's UK CFO Survey are more optimistic about the prospects of their organisation than they were at the beginning of the year — marking the largest increase in confidence since the COVID-19 vaccine roll-out at the end of 2020.
"Having run markedly below average throughout last year, business confidence has risen sharply and is now well above its long-term average," the report said.
The survey was conducted between 21 March and 3 April from 64 CFOs, including 24 from companies listed in the FTSE 250.
Uncertainty going down
Despite the collapse of Silicon Valley Bank on 10 March, CFO perceptions of external financial and economic uncertainty have fallen at the fastest pace since this question was first asked in 2010 — from 71% of CFOs rating uncertainty as high or very high in late 2022 to 39% this past quarter. External uncertainty is at levels far below the previous peak last fall, the start of the pandemic in 2020, and following the EU referendum in 2016, Deloitte said.
"The economic unpredictability that marked the beginning of 2023 has started to clear, with CFOs reporting the largest decline in perceptions of uncertainty to date," Deloitte chief economist Ian Stewart said in a news release. "Business confidence has rebounded, helped by a decrease in energy prices, an easing of Brexit concerns, and an improving inflation backdrop."
Concerns ease, but risk remains
CFOs' risk appetite remains below normal survey levels. Seventeen per cent say now is a good time to take greater risk onto their balance sheets, and 44% consider building up cash to be a strong priority for their businesses.
Finance leaders report a fall in supply disruptions faced by their businesses this quarter. Regarding supply chains, just 7% expect "significant" or "severe" levels of disruption to persist a year from now. Also, CFOs project inflation in one year to be 4.2%, down from the projection of 5.8% the previous quarter.
The future of artificial intelligence
The report said that 75% of CFOs expect to see significant growth in capital spending on artificial intelligence (AI) — established technologies and newer ones such as ChatGPT — over the next five years.
Two-thirds of finance leaders believe the adoption and application of AI will help raise UK productivity. But CFOs are split, almost equally, between those who believe AI will lead to an increase in jobs and those who believe it will reduce jobs over the next five years.
— To comment on this article or to suggest an idea for another article, contact Kevin Brewer at Kevin.Brewer@aicpa-cima.com.