Hopes of fast-paced economic recovery as UK finance chiefs foresee spending boom

Spending by the UK’s largest businesses is set to surge in the coming months, according to a major survey of finance chiefs from firms collectively worth nearly £550 billion.

The study by Deloitte of chief financial officers (CFO) found that such executives rate growth as their top priority, with expectations for an increase in hiring and investment at their highest levels in almost seven years.

The accountancy giant’s UK CFO Survey Q2 2021 has revealed specifically that 71 per cent of CFOs expect rises in capital expenditure and 76 per cent forecast increases in hiring over the year ahead.

The survey was conducted between June 16 and 29, encompassing 107 CFOs, including those at 21 FTSE 100 and 43 FTSE 250 companies. The combined market value of the 69 UK-listed firms that participated is £548 billion, and equating to about a fifth of the UK quoted equity market.

More than four in ten CFOs report that demand for their own businesses has already returned to pre-pandemic levels, Deloitte says (file image). Picture: John Devlin.

Deloitte also said CFOs are now placing more emphasis on expansionary strategies, with 41 per cent rating the introduction of new products and services or expanding into new markets as a top priority.

Meanwhile, 30 per cent rate expanding by acquisition and 22 per cent cite increasing capital expenditure as a strong priority over the next 12 months. CFOs see growth via acquisition as “a higher priority than at any time in the last 11 years”, Deloitte also stated.

Cost-reduction, which had been a key priority for CFOs since the start of the pandemic, was found to now be a lower priority than at any time in the last seven years, and about 90 per cent of finance bosses expect to increase investment in digital technology, while more than eight in ten predict gains in business performance and productivity.

As the economy regains momentum, 41 per cent of CFOs were found to say demand for their own businesses has already returned to pre-pandemic levels, up from 27 per cent in the first quarter of the year – and more than half have either reported a full recovery in demand or expect to do so by the end of the year.

Ian Stewart, chief economist at Deloitte, said: “With the economy reopening, CFOs’ perceptions of external uncertainty have dropped below the average of the last five years, and businesses have tacked away from the defensive strategies that helped them through the downturn.”

Comprehensive

He also said it is likely that there will be “years of normal growth compressed into just a few months”, adding: “Indeed, eight in ten CFOs believe that productivity will run higher in the wake of the pandemic. That offers the hope of a more comprehensive recovery than after the global financial crisis.”

Additionally, while Brexit dropped down the risk list, the pandemic remains “by a slim margin” the biggest concern for CFOs, with rising inflation and climate change also in the top three.

Nearly a third of CFOs expect inflation to be above 2.5 per cent in two years’ time, and their expectations for a rise in operating costs have hit a ten-year high.

Steve Williams, senior partner for Deloitte in Scotland and Northern Ireland, said finance leaders are now focused on innovating and coming up with new products and services. “Investing in digital technologies will be key to business agility and creating sustainable growth,” he also said.

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