Survey of financial directors predicts more uncertainty over Brexit

Uncertainty over the impact of Brexit is forcing financial directors to reconsider investment plans, according to Deloitte and the accountancy firm expects conditions to deteriorate further once the UK leaves the EU.

The quarterly survey from Deloitte has shown that about 88% of chief financial officers (CFO) see business uncertainty as above normal to very high, while 65% expect the long-term business environment will be worse after Britain leaves.

Ian Stewart, chief economist at Deloitte, said: “The animal spirits of the corporate sector took a battering in the wake of the referendum and, three months on, Brexit continues to loom large for the UK corporate sector. Since our last survey we’ve seen the appointment of a new Prime Minister, a strong rally in equity markets and a solid run of UK economic data. But CFOs continue to see significant risks in the economic environment and perceptions of uncertainty remain elevated.”

CFOs rated Brexit as the biggest business concern, followed by weak demand in the UK, and concerns about poor productivity. Other concerns included deflation and economic weakness across the euro area, the possibility of tighter monetary conditions, and the US presidential election.

When asked how Brexit would affect business decisions, 40% said that capital expenditure would drop, while 46% expect hiring to slow, and 55% forecast discretionary spending would drop.

Around 82% said that now was a bad time to take risk onto their balance sheet, marking the second highest reading since the end of 2011.

However, the proportion of UK finance chiefs that expect revenues to drop over the next year has fallen to 24%, down from 63% in the second quarter, while 44% forecast operating margins to decrease, from 70% in the previous reading.