Business confidence among the chief financial officers (CFOs) of the UK’s largest firms has increased sharply as concerns related to economic and financial uncertainty have dropped to their lowest level since the first quarter of 2011, according to a quarterly survey conducted by professional services firm Deloitte.
The survey, which collected views of 120 CFOs during March 2013, finds that liberalised monetary policy, improving financial conditions, and growth in equity markets have contributed to a more positive mood among large companies.
Despite the bailout of Cypriot banks in March, the surveyed CFOs were confident that the eurozone will hold together. They believe there is an 18 per cent chance that the euro will break up in next one year.
Ian Stewart, chief economist of Deloitte, said that corporate appetite for risk was not far off the recent peaks seen in early 2011 when Europe looked set for a sustained recovery. “Despite the gloomy coverage around the UK Budget and the crisis in Cyprus, CFOs believe that the level of economic and financial risk facing their businesses has declined,” Stewart added.
“Reduced stress in financial markets, especially in the euro area, has delivered improvements in credit conditions for big UK corporates. It is a measure of the change that CFOs now rate bank borrowing as offering a more attractive form of finance than at any time since the start of the financial crisis,” he continued.
The Funding for Lending Scheme (FLS) of the Bank of England and the Treasury launched last summer looks to have had a significant impact on the mortgage market than on lending conditions for smaller businesses.
Stewart said that the UK-based businesses with strong overseas exposure had become much more willing to take risk and were shifting towards more expansionary policies.
In the survey, 34 per cent of CFOs said this is a good time to take risk on to their balance sheets, compared with 25 per cent in the final quarter of 2012. As well as rise in corporate risk appetite, the survey found that finance chiefs have also reduced their emphasis on cost control and cash flow.
Earlier this month, the British Chambers of Commerce’s quarterly survey reported rising exports and domestic sales in the first quarter of 2013.