Policy uncertainty at home and economic and geopolitical risks overseas are the central challenges facing chief financial officers (CFOs) of the UK’s largest companies as they enter 2015, according to a survey by Deloitte.
Deloitte’s latest CFO Survey gauged the views of 119 CFOs of FTSE 350 and other large private UK companies. It found that risk appetite among CFOs fell in Q4 2014. 56 percent of CFOs say that now is a good time to take greater risk onto their balance sheets, down from a record reading of 71 percent in Q3 2014 but still well above the long-term average. The change was driven by concerns over political and economic risk uncertainties: when asked to rate the level of risk posed between 0 and 100, CFOs attached a 63 rating to the UK General Election and 56 to deflation and weakness in the Euro area and to a possible referendum on the UK’s membership of the EU. The level of risk posed by each factor has risen in the last three months. 60 percent of CFOs enter 2015 with above normal, high or very high levels of uncertainty facing their businesses, up from a low of 49 percent in Q2 2014 but at the same level seen 12 months ago.
Ian Stewart, chief economist at Deloitte, said: “The central challenges facing the UK’s largest companies as they enter 2015 are policy uncertainty at home and economic and geopolitical risks overseas. Rising levels of uncertainty have caused a weakening of corporate risk appetite which, nonetheless, remains well above the long-term average.”