UK chief financial officers (CFOs) are deeply pessimistic on revenue expectations, investment and hiring plans since the referendum result on June 24 saw British voters support the country’s exit from the European Union (EU), reports Deloitte.
The business consultancy canvassed opinion among 132 CFOs at FTSE 350 and other large UK companies in the wake of Brexit and found that 73% were less optimistic about their companies’ financial prospects than they were three months ago.
The level of negative sentiment is the highest since Deloitte launched the survey in 2007 and even exceeds that reached following the demise of Lehman Brothers in September 2008.
Eighty-two per cent of CFOs participating in the survey said that their company planned to reduce capital spending over the next 12 months, against 34% in a similar survey at the start of 2016. The percentage expecting a drop in hiring jumped from 29% to 83%.
“There has been a marked shift to more defensive balance sheet strategies in the wake of the referendum, with a focus on reducing costs, building up cash flows and caution on all forms of spending,” commented Ian Stewart, chief economist at Deloitte.
However, he also offered some hope, adding: “The Brexit vote is a major political shock but not, in the first instance, an economic or financial shock on the scale of the Lehman’s collapse.
“Yet in the wake of the Brexit vote business confidence has fallen even more than it did following the failure of Lehman. My guess is that with a new prime minister in place and a gathering government response to Brexit we will see business sentiment edge higher towards the end of the year.”
Nearly two in three survey respondents expect their companies’ revenues to fall in the next year, against 11% in the first quarter of 2016. More than two-thirds of CFOs the UK’s long-term business environment will deteriorate as a result of leaving the EU, with only 13% cent expecting an improvement.
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