A majority of UK CFOs polled in late 2024 expect to increase cost-cutting and curb risk exposure in 2025. This sentiment follows the UK government’s decision to increase National Insurance contributions for employers, according to a survey report from Deloitte.
As finance chiefs prepare to navigate further uncertainty from impending tax increases, they plan to approach corporate investment, discretionary spending, and hiring with more caution and frugality, the report said.
CFOs say their strategy for budgeting will be to offset the increase in National Insurance costs by making savings elsewhere. They also plan to offset costs by raising productivity in their organisations. Deloitte surveyed 63 CFOs in December 2024.
UK corporates expect to cut capital expenditure, discretionary spending, and hiring over the next 12 months. According to the report, hiring expectations saw the sharpest fall since early 2020.
Consequently, economic uncertainty in the region means optimism has fallen to a two-year low, and this marks the first time sentiment has tipped into negative territory since the second quarter of 2023, the report said. Thirty-seven per cent of leaders surveyed say they feel “neither optimistic nor pessimistic”; 30% feel “somewhat optimistic”; and 23% report feeling “somewhat pessimistic” about the business environment this year.
Those feelings inspire restraint, as only 18% of finance leaders feel well positioned to take on additional risks this year, making the fourth quarter of 2024 the weakest in terms of risks appetite in five quarters.
However, concerns surrounding high inflation and interest rates have lessened, the report said.
As uncertainty persists, CFOs are focused on developing defensive strategies over the next 12 months to reduce costs (52%) and increase cash flow (42%), the report said, with a moderate focus on market expansion and introducing new products and services (25%).
— To comment on this article or to suggest an idea for another article, contact Steph Brown at Stephanie.Brown@aicpa-cima.com.
