Business optimism among Britain’s finance chiefs has slumped to its lowest level on record in the wake of last month’s historic vote to leave the European Union, a study today suggests.
Almost three-quarters, or 73 per cent, of chief financial officers (CFOs) are less optimistic about the financial prospects for their company following the referendum result, up from 32 per cent in the first quarter of the year, according to accountancy giant and business adviser Deloitte.
The figure is the highest level registered since the firm’s survey began in 2007 and higher than during the collapse of Lehman Brothers in 2008.
As a result, finance bosses are likely to put the brakes on hiring and rein in capital spending in the expectation that revenues will slide.
Deloitte polled 132 finance bosses from FTSE 350 and other large private companies between 28 June and 11 July, capturing business sentiment in the immediate aftermath of the 23 June referendum. Of those listed companies, their combined market capitalisation amounts to £365 billion.
David Sproul, senior partner and chief executive of Deloitte, said: “The outcome of the EU referendum has triggered a sharp, negative response from the corporate sector. This survey was conducted immediately after the referendum, against a backdrop of historical political upheaval and financial uncertainty.
“The faster-than-expected appointment of a new prime minister removes one source of uncertainty, now the government must set out its vision for the UK’s future relationship with the EU to provide further stability and reassurance.”
The firm’s chief economist, Ian Stewart, added: “Perceptions of uncertainty have soared to levels last associated with the euro crisis five years ago. The spike in uncertainty has had a toxic effect on business sentiment with optimism dropping to the lowest level since our survey started in 2007.
“However, the immediate scale of post referendum shock has not been of the same scale as 2008. Sterling has fallen faster but UK equities have proved more resilient.
“Consumer confidence in July recorded its sharpest monthly fall in almost 22 years, but it remains much stronger than it was post- Lehman.”
The survey revealed that 83 per cent of CFOs expect a slowdown in hiring over the next year, the highest number recorded and up significantly from 29 per cent in the first quarter. The proportion forecasting a cut in discretionary spending – 82 per cent – is the highest since the final quarter of 2011.
To counter the negative effects of the referendum result, 91 per cent of CFOs are urging the UK government to send a “strong signal” about its aims in negotiations with the EU. Meanwhile, 54 per cent say they expect interest rates to be below 0.5 per cent in a year’s time.