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The Deloitte CFO Survey: 2010 Q4 results

2011 outlook: CFOs planning for growth

The 2010 fourth quarter Deloitte Chief Financial Officer Survey, published on 4th January 2011, shows that Optimism among the UK’s largest companies rebounded in the fourth quarter of 2010 with appetite for risk rising to levels higher than immediately prior to the recession. Fears of a double dip have abated from the levels seen earlier in the year.

Greater confidence and appetite for risk seem to have led corporates to shift from defensive to expansionary strategies. If 2010 was the year of balance sheet rebuilding and cost cutting, 2011 looks set to be the year in which corporates start spending again. Cost control has dropped from first to third priority for corporates. Introducing new products or services or expanding into new markets is the first priority for corporates in 2011. Even risk-averse CFOs rate this as a top priority for their business. Increasing capital expenditure and expanding by acquisition were selected as strong priorities in 2011 for their business by a third of high risk appetite CFOs. Opportunities for UK businesses in 2011 cited most frequently by CFOs were investing or undertaking acquisitions at lower prices, growing organically and expanding in emerging markets. A new emphasis on expansion by the UK’s large companies for 2011 lends support to the idea that the recovery is likely to broaden out through 2011 aided by growth in private sector hiring and capital spending.

Part of this optimism seems to reflect confidence about demand from overseas. Only 39% of CFOs expect the UK to make the biggest contribution to the growth in their company’s revenues in 2011. Indeed, 34% of CFOs see emerging markets as making the biggest contribution to revenue growth. Improving credit conditions are also likely to have contributed to rising optimism and risk appetite. Debt finance fell out of favour with CFOs during the recession. But improving credit availability and lower interest rates have led to a marked change in attitudes. In the fourth quarter of 2010 bank borrowing and bond issuance were as popular with CFOs as they were before the credit crunch started, in 2007. And after a period of aggressive corporate debt reduction CFOs think the UK corporate sector is no longer over leveraged.

Against a backdrop of constrained credit supply and weak top line growth the focus for UK corporates over the last two years has been on strengthening balance sheets and cutting costs. Those strategies have worked: profitability has risen sharply, debt levels have declined and companies have generated big increases in cash flow. The evidence from this quarter’s CFO Survey is that from this position of strength corporates are increasingly planning for growth in 2011.

Download the full report: The Deloitte CFO Survey 2010 Q4 results (771KB, PDF)
Download a PDF with the historical data of all regular questions (209KB, PDF)

About the Deloitte CFO Survey

The Deloitte CFO Survey, launched in 2007, is a quarterly survey of Chief Financial Officers and Group Finance Directors of major UK companies. The Survey captures shifts in UK CFOs' opinions on valuations, risks and financing and has become a benchmark for gauging financial attitudes of major corporate users of capital.

Over 300 CFOs, mainly from FTSE 350 companies, have joined the CFO Survey panel. In the latest survey, covering the third quarter of 2010, 126 CFOs participated, including CFOs of 35 FTSE 100 and 45 FTSE 250 companies. The rest were CFOs of other UK listed companies, large private companies and UK subsidiaries of major companies listed overseas. The combined market value of the 94 UK listed companies surveyed is £690billion, or approximately 36% of the UK quoted equity market.

The Deloitte CFO Survey has been widely quoted in the media and is firmly established with the policymakers. The Bank of England has cited the CFO Survey several times in its publications such as the quarterly Inflation Report and the monthly Trends in Lending report. The findings have also been quoted in the minutes of the Bank's Monetary Policy Committee meetings.

For more information on the survey, please contact Ian Stewart, Chief Economist at Deloitte Research or Ravi Komatireddy, Senior analyst, Economics and Finance.

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