CFOs positive about UK’s economic future
Chief financial officers (CFOs) are positive about the future of the UK's economy, according to a new report.
Deloitte's latest CFO Survey found that finance professionals are broadly upbeat over the potential for earnings growth and business, with the typical increase expected to be 2.9 per cent in 2015.
This is well in excess of CPI inflation, which economists believe will swell by 1.3 per cent across the 12-month period. Indeed, increasing capital expenditure has become a strong priority for many CFOs - it reached a two-year high in the fourth quarter of 2014 - as companies target more investment.
More than half (56 per cent) of finance leaders think now is a good time to take a risk with their balance sheets. While this is below the Q3 high of 71 per cent, it is still well above the long-term average and underlines the continued confidence in the pace of the UK's recovery.
Chief economist at Deloitte Ian Stewart believes that "policy uncertainty at home and economic and geopolitical risks overseas" represent the biggest challenges for UK companies, especially when it comes to risky investments.
"CFOs expect 2015 to be a year of investment and of recovering real earnings in the UK. Corporate and consumer spending look set to lend the UK economy important support, suggesting the UK will post decent growth through 2015," he added.
The upcoming general election, which is scheduled to take place on May 7th, is causing some concern, as some CFOs think uncertainty over who will form the next government could affect business. When asked to rate the level of risk posed between 0 and 100, they attached a rating of 63, marking it out as a bigger concern than deflation and weakness in the eurozone area.
With concerns about policy changes set to continue over the next five months in the run-up to the election, it will dominate the thinking of many CFOs.
However, it marks a departure in terms of primary worries, as for the first time since the financial crisis, the main focus is no longer on the state of the economy. This shows how major corporations now believe the long consumer squeeze has ended.
A buoyant year in terms of business investment is also being forecast, with average growth expected to be nine per cent. If this expectation is realised, it would see the UK top of the league for investment growth in the major industrialised nations.
"CFOs are positive on the UK business environment. Most do not think the UK has a particular productivity problem and CFOs overwhelmingly see the UK as a good place to do business," Mr Stewart remarked.
The role of CFOs
As CFOs look to contend with a series of problems, it's clear the nature of the role has changed in recent years. No longer viewed as purely financial gatekeepers, these financial professionals are now expected to play a strategic role in the development of the business.
With organisations looking to survive in what is an increasingly competitive climate, and deal with additional regulation, CFOs have a real opportunity to drive performance and business value.
Today's finance leaders can increase their sphere of influence by adapting to their circumstances. With the UK set to face political and economic challenges in the coming months, CFOs will be trying to steer their companies towards success.