Most finance chiefs expect recession this year

THE collapse of the eurozone and an ensuing credit crunch are the biggest fears of Britain’s chief financial officers this year, according to a survey published today.

A majority of financial directors now expect the UK to slip back into recession this year, up from a quarter a year ago, accountancy firm Deloitte’s UK-wide quarterly CFO questionnaire found.

Some 37 per cent of finance chiefs think that at least one country will drop out of the eurozone this year.

CFOs believe that a collapse of the euro would have a severe effect on UK businesses, causing a fresh credit crunch and driving major swings in asset prices and exchange rates.

That finding backs up the results of a joint survey by the Institute of Chartered Accountants in Scotland (Icas) and Deloitte in November, which showed that almost two-thirds of Scottish respondents thought the collapse of the euro would have “very significant adverse consequences” for their businesses.

Ian Stewart, Deloitte’s chief economist, said: “Against such a backdrop, it is no surprise that a return to recession in the UK is, after the euro, the second- biggest concern for CFOs in 2012.

“CFOs are now working on the assumption that Britain will fall back into recession. They see a 54 per cent chance of the UK suffering a ‘double dip’, up from just 27 per cent a year ago.

“The majority of respondents expect a prolonged period of weakness lasting more than a year. Moreover, financial stress is already affecting big corporates, with CFOs reporting the sharpest decline in credit availability since the third quarter of 2008.”

The survey marks the fourth consecutive quarter during which business confidence among the UK’s CFOs has fallen.

Financial directors said strengthening their balance sheets was their top priority for the year ahead, tied in with reducing their costs and increasing their cash flow.

Ian Steele, Deloitte’s senior partner in Scotland, said: “Global markets would be key for Scottish firms in 2012”.

Steele added: “Scottish companies with the opportunity, financial strength and appetite to move into overseas markets beyond Europe – or who can feasibly grow existing global operations – will be in the best position to prosper in what looks to be a very tough year ahead.

“Ongoing difficulties with access to credit and new capital continue to limit domestic and European trading opportunities, so it’s understandable that so many businesses in these markets feel like the only option is to take a defensive position and hope to ride it out.”