Appetite for debt finance among directors hits lowest level since 2009

Finance directors see bank borrowing and debt issuance as less attractive now than at any time since the financial crisis, according to a new survey.
By Lizzie Murphy
Published 5th Jan 2023, 16:45 BST

Deloitte’s UK CFO Survey, Q4 2022 found that as a result of this demand for credit is well below average levels, with only 28 per cent of CFOs (chief financial officers) saying they expect their company’s demand for it to increase over the next 12 months.With interest rates at 3.5per cent, CFOs rate credit as being more expensive than at any time since 2009. Just over two-thirds (70 per cent) of CFOs rate credit as costly, while 45 per cent say that new credit is hard to get.

Deloitte’s latest CFO Survey, conducted between December 6 and 16, 2022, captured sentiment amongst the UK’s largest businesses at the end of a year of high inflation, supply disruptions and rapidly rising interest rates.

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A total of 78 CFOs participated in the latest survey, including those of 17 FTSE 100 and 32 FTSE 250 companies. The combined market value of the 53 UK-listed companies that participated is £363bn, approximately 15 per cent of the UK quoted equity market.

Anil Gupta, office senior partner at Deloitte for Leeds and Yorkshire. Picture: Simon Dewhurst.Anil Gupta, office senior partner at Deloitte for Leeds and Yorkshire. Picture: Simon Dewhurst.
Anil Gupta, office senior partner at Deloitte for Leeds and Yorkshire. Picture: Simon Dewhurst.

Despite the challenging macro environment, the perception of external risk, particularly inflation, has eased since October’s peak.

The CFO risk rating for 11 of the areas tracked in the survey have declined and only two, relating to weakness in the US economy and in emerging markets, increased.

Anil Gupta, office senior partner at Deloitte for Leeds and Yorkshire, said: “Tightening credit conditions mean CFOs continue to view credit as costly and unattractive alongside anticipating cuts in spending over the year ahead.

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"But it’s encouraging to see that in the medium term most CFOs expect to invest more in workforce skills. A majority of finance leaders are also predicting to spend more on digital technology, assets and, in turn, believe that there will be greater productivity and business performance over the next three years.”

Ian Stewart, chief economist at Deloitte, added: “The most aggressive tightening of monetary policy in more than 30 years is reshaping corporate attitudes to debt. Not since the credit crunch have CFOs rated debt as being less attractive as a source of finance for their businesses than they do today.

"When interest rates were at very low levels, debt finance easily eclipsed equity as a source of finance. CFOs now see them as being roughly on par.”

Related topics:Deloitte