Brexit vote sees business confidence plunge to record low

Britain's decision to quit the European Union has seen business optimism among finance chiefs plummet to its lowest level on record, with confidence even lower than that seen at the hight of the 2008 financial crisis.
The 'Gherkin' and Canary Wharf at sunrise in the City of LondonThe 'Gherkin' and Canary Wharf at sunrise in the City of London
The 'Gherkin' and Canary Wharf at sunrise in the City of London

A survey published today by consultancy giant Deloitte shows that 73 per cent of chief financial officers (CFO) are less optimistic about the prospects for their company following the referendum result, up from 32 per cent in the first quarter of the year.

The figure is the highest level registered since Deloitte’s survey began in 2007 and, as a result, business bosses are now likely to begin to put the brakes on hiring and rein in capital spending in the expectation that revenues will plunge.

Hide Ad
Hide Ad

Overall, 68 per cent of CFOs believe that leaving the EU will lead to a deterioration in the UK business environment in the long term. Twenty per cent expect little change and 13 per cent expect an improvement.

The EU referundumThe EU referundum
The EU referundum

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.

“As companies begin to feel the environment stabilising, we may see confidence improve in next quarter’s survey.

Hide Ad
Hide Ad

“The UK remains a vibrant, innovative and highly-skilled economy and I continue to believe it can navigate through a time of change, retain its global influence and remain a magnet for international talent and investment. My own conversations with chief executives and chairmen also provide reassurance that some priorities haven’t shifted.

The EU referundumThe EU referundum
The EU referundum

“Businesses are still looking to take advantage of advances in technology and digital and increasing productivity.

“The Leave vote and subsequent uncertainty has made these more important to pursue.”

The survey also 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.

Hide Ad
Hide Ad

The proportion forecasting a cut in discretionary spending (82 per cent) is the highest since 2011.

To counter the negative effects of the referendum result, 91 per cent of CFOs are urging the Government to send a “strong signal” about its aims in negotiations with the EU.

A total of 88 per cent also said that maintaining the solvency and liquidity of the banking system is “essential”, while 25 per cent urged the Government to continue with a deficit reduction plan.

Some 95 per cent of CFOs say the level of uncertainty facing their business is above normal, high or very high, up from 83 per cent in the first quarter and returning to levels last seen during the euro crisis in 2012.

Hide Ad
Hide Ad

Ian Stewart, chief economist at Deloitte, said: “CFOs do not seem to be waiting for growth to slow before adjusting direction. There has been a marked shift to more defensive balance sheet strategies in the wake of the referendum, with a focus on reducing costs, building up cash flow and caution on all forms of spending.

“Corporate willingness to take risk has seen one its largest ever declines while the outlook for capital spending, hiring and discretionary spending is at levels last seen just before the so-called ‘double-dip’ slowdown of 2012.”

A total of 132 CFOs of FTSE 350 and other large private companies, worth more than £365 billion, participated in Deloitte’s survey.