Finance directors at their most anxious about Brexit since 2016 referendum

FDs reining in hiring and investment as uncertainty increases over no-deal outcome

Finance directors are the most anxious they have been about Brexit since the 2016 referendum, with more of them reining in hiring and investment plans.

Accountancy group Deloitte has warned that worries over the long-term impact of Brexit are mounting. This is pushing down optimism over future prospects as firms fear their trading relations with customers in the European Union could be disrupted next year.

Deloitte’s latest survey of chief financial officers found that only 13 per cent are more optimistic about the prospects of their company than they were three months ago. That is a sharp fall compared with July, when 24 per cent expected conditions to brighten.

Worries over Brexit have risen, too; 79 per cent of CFOs expect the long-term businesses environment to be worse as a result of leaving the EU, up from 75 per cent in the second quarter of 2018. This is the third consecutive quarterly rise, to the highest level since the referendum.

“CFOs have become more pessimistic about the long-term effects of the UK’s departure from the EU,” said Deloitte chief economist Ian Stewart.

“Large corporates are pulling in their horns, with just 12 per cent of CFOs saying now is a good time to take a risk and 44 per cent expecting their own capital spending to be lower over the next three years.

“Indeed, CFOs are more negative about the effects of Brexit today than at any time since the EU referendum.”

Deloitte interviewed 95 CFOs, including 18 at FTSE 100 companies and 36 at smaller firms listed on the FTSE 250.

The number of CFOs expecting revenue rises in the coming year also dropped, from 42 per cent last quarter to 31 per cent.

Furthermore, almost half (48 per cent) of CFOs reported recruitment issues and skills shortages in the previous quarter, up slightly from 44 per cent in Q2.

David Sproul, UK CEO of Deloitte, said: “Our survey also shows that beyond the future trade deal, access to skills for business is an increasingly pressing issue.”

Despite this, half of the group warned that hiring would slow over the next three years as a result of Brexit, up from 40 per cent.

CFOs have sharpened their focus on shoring up the balance sheet with a greater emphasis on cost reduction than any time in the last nine years. Fifty-three per cent cite cost control as a strong priority, up from 47 per cent.

  • 56 per cent of CFOs say they expect the Bank of England’s base rate to be at or above 1 per cent within a year’s time.
  • 28 per cent of CFOs expect the rate to be a 1.25 per cent or above within a year.
  • 65 per cent of CFOs expect inflation to be above 2.5 per cent within a year.