The latest Deloitte CFO Survey reveals fears and concerns surrounding Brexit.
According to the survey, 83% of those CFOs canvassed expect the long-term business environment to deteriorate once the UK leaves the EU – a reading not seen since the June 2016 referendum.
Deloitte’s Chief Economist, Ian Stewart, said that the uncertainty is dragging on sentiment and spending.
He said: “Events in the last three years, and recent news suggesting the economy shrank in the second quarter, have added to worries about the impact of Brexit.
“This is not solely a question of the long-term outlook. Brexit has not happened, but it is acting as a drag on corporate sentiment and spending.
“Almost two thirds (62%) of CFOs expect to reduce hiring in the next three years as a result of Brexit and almost half (47%) expect to reduce capital spending, suggesting a cautious approach from businesses.
“Ironically, risk appetite in the corporate sector has slumped just as it has taken off in the equity market. Measures of financial market volatility have declined, even though a majority of CFOs rate uncertainty as being at high or very high levels.”
The UK’s largest businesses are canvassed in the Deloitte CFO Survey, gauging sentiment and confidence; those whose results are part of the survey include FTSE 350 companies, and the total market value of the listed companies participating in the survey stands at £345 billion – approximately 15% of the UK quoted equity market.
Elsewhere in the Deloitte CFO Survey, despite the fact CFOs expect to reduce capital spending and employment as a result of Brexit, confidence of investors is surging; indeed, the FTSE passed 7,600 in July.
Ian Stewart explains the difference in approach between CFOs and investors.
He said: “Equity valuations imply that investors believe central banks will save the day but the downbeat mood of UK CFOs suggests corporates are less sanguine.”