Rising Inflation and Borrowing Costs Drive UK CFOs to Become More Cautious, Says Deloitte Survey

The recent survey conducted by Deloitte, a leading financial consultancy firm, has revealed that chief financial officers (CFOs) at major British firms have become more cautious in the face of rising inflation and interest rates.

The survey, which was conducted in the second quarter of 2023, revealed a significant shift in the optimism of CFOs, with a net balance of -10% indicating a negative outlook, compared to the previous quarter's net balance of +25%.

Deloitte's chief economist, Ian Stewart, attributed the decline in optimism to the impact of inflation and rising interest rates on businesses.

Cost reduction and cash control have become the top priorities for corporations, according to the survey.

The survey also indicated early signs of a cooling in the labor market, with CFOs anticipating a slowdown in hiring and pay growth.

The Bank of England, which has been monitoring the labor market closely, is considering raising borrowing costs for the 14th time in a row on August 3, 2023, to combat high inflation.

Tight monetary policy was identified as the biggest threat to businesses by CFOs, overtaking concerns around geopolitics and energy prices that have dominated for the past two years.

The survey, conducted between June 15 and 27, included responses from 69 CFOs, 13 of whom were from FTSE 100 firms, and 21 from FTSE 250 companies.

In a related development, the Confederation of British Industry (CBI) called on the government to deliver a clear and stable policy environment and offer incentives for investment to boost the British economy by as much as £57 billion ($75 billion) or 2.4% of GDP by 2030.

The CBI report emphasized the need for green growth opportunities and urged all political parties to prioritize it in their manifestos.

The Deloitte survey and the CBI report highlight the challenges facing the British economy, including inflation, rising interest rates, and tight monetary policy, as well as