Corporate Risk Appetite Among U.K. CFOs Rises As New Government Sets Strategy

Business confidence in the United Kingdom has risen for the fourth consecutive quarter, with corporate risk appetite among finance leaders lifting to its highest in more than four years following the general election, according to the latest quarterly CFO survey from Deloitte. It reports 36% of finance chiefs stating that now is a good time to take greater risk onto their balance sheets, with 64% of CFOs expecting UK corporate revenues to increase over the next 12 months, against 42% seen last quarter..

Only 23% of CFOs rate the level of external financial and economic uncertainty to their businesses as “high” or “very high” . The expectations among finance leaders for corporate revenue growth are at their highest level since the pandemic, despite the continuing dominance of geopolitical risk as the top risk to business for the past two and a half years.

“We’ve seen a significant shift in risk appetite post the general election and the new government’s focus on growth and stability is already increasing corporate confidence.. Business leaders want industrial strategy to be top of the new government’s economic priorities, and there’s a clear desire to work in partnership to unlock growth and drive productivity. This will be critical to delivering an inclusive and sustainable future for the UK” said Richard Houston, senior partner and CEO of Deloitte UK.

Reports of boosted spirits in the corporate sector come after Rachel Reeves, Chancellor of the Exchequer, used her first international visit since taking office to bang the drum for British business at the G20 meeting in Rio deJaneiro, Brazil. Britain’s first female Chancellor delivers an anticipated statement to the UK Parliament today on the scale of the challenge facing government finances in choices that lie ahead. When CFOs were asked what they think the top economic priorities for the newly elected government should be, industrial strategy came first, followed by planning reform.

Reducing cost and increasing cashflow remain the top two priorities for finance leaders over the next 12 months, with CFOs rating each at 51% (previous quarter 56%) and 35% (previous quarter 43%) respectively. But the focus on increasing cashflow is at its lowest level in almost two years and below the average since the question was first asked, says Deloitte.

“Finance leaders have entered the second half of the year in confident mood. This is not solely a sentiment story. as expectations for revenue growth have also risen sharply….with corporate risk appetite on the rise, business is gearing up for growth” said Ian Stewart, chief economist at Deloitte. He pointed to “ a more predictable business environment “ for the boost in spirits within the corporate sector, saying it “ shows that the worries around Brexit, COVID-19, inflation and politics that have weighed on corporate spirit for much of the last eight years are clearing..’

Finance leaders have also reported an improvement in credit conditions, says Deloitte. They rated credit as being more available than at any time in the last two years, with a net 42% of the panel surveyed reporting that it is “easily available.”

The 2024 Deloitte second quarter CFO survey took place between 9 July and 19 July, with 61 CFOs participating, including the CFOs of 31 FTSE 350 companies. The rest were CFOs of other UK-listed companies, large private companies and UK subsidiaries of major companies listed overseas.

There were two special questions in this quarter’s survey on the topic of the 2024 general election, asking about the impact of the election on capital expenditure, deal-making or hiring over the next year. The balance of opinion among the CFOs tilted towards the election having a mildly positive effect (21%) with the majority (69%) believing the election would have little or no impact on their plans.

But, looking at the newly elected House of Commons with all all its diversity and representation, it will be interesting too to see if corporate risk appetite extends to a further push towards broadening the representative leadership in boardrooms by gender, ethnicity and socio-economic background in the search for productivity and inclusive growth.