The Deloitte CFO Survey: 2009 Q4 results
2010: optimism, opportunity, risk
About the Deloitte CFO Survey
The Deloitte CFO Survey, launched in September 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 200 CFOs, mainly from FTSE350 companies, have joined the CFO Survey panel. 128 CFOs took part in the latest survey, carried out in December 2009. CFOs of 97 UK listed companies, accounting for approximately 28% of the UK quoted equity market, were surveyed.
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 regularly in its Inflation Reports and Trends in Lending reports in the last two years and the findings have been quoted in the minutes of the Bank's Monetary Policy Committee.
A summary of the current Deloitte UK CFO Survey
2009 Q4 results: 2010: optimism, opportunity, risk
The 2009 fourth quarter Deloitte Chief Financial Officer survey, published on 4th January 2010, shows that CFO optimism about the financial prospects for their business has reached the highest level since the survey started over two years ago. Their willingness to take financial risk, a key gauge of confidence, is running at levels last seen in early 2008 when the general expectation was for a modest slowdown in global growth.
Their concerns about shortages of liquidity and credit have reduced substantially over the last year, and 78% of CFOs think the UK banking system is strong enough to sustain the recovery. However, they are worried about about the outlook for the UK economy next year.
Priorities for 2010
This quarter’s CFO survey sheds light on CFOs’ top priorities for 2010. Reducing costs and increasing cash flow feature among the top three priorities of 51% of respondents, indicating that they are seen by CFOs as vital in the recovery. CFOs are also planning to deploy a series of strategies designed to expand market share and increase revenues in 2010. Introducing new products and services was cited among their top three priorities by 46% of respondents. Expanding into new markets and expanding by acquisitions were also widely cited.
Concerns and opportunities
48% of CFOs identified the state of the economy as their greatest concern in 2010, with many citing fears of a “double dip” recession. In contrast to their greatest concerns a year ago when worries about shortages of liquidity and credit dominated their answers, only 13% of CFOs now cited wider concerns about the financial system as their greatest concern. Action by authorities, in the form of interest rate cuts and aid to the financial system, and action by corporates, in the form of cutting costs, raising capital and husbanding cash, seem to have eased concerns about liquidity and funding shortages.
In terms of opportunities, CFOs think 2010 offers the prospect of raising revenues through organic growth, expanding into new markets or by taking market share from weaker competitors. Many CFOs are also planning to make acquisitions. The great majority of CFOs expect M&A activity to rise over the next year.
Corporates, in a recession that proved to be much deeper than initially expected, have demonstrated resilience. Corporate insolvencies have risen less than they have in the 1990s recession, and rates of return have also been stronger. This quarter we asked CFOs to give their verdict on how their business has coped with the recession. CFOs said that the greatest successes for their company in dealing with the recession have been in maintaining relations with shareholders and banks, controlling labour costs and managing cash flow. These are precisely the strategies that CFOs identified a year ago as holding the key to surviving the recession.
CFOs have also reacted to the recession by reducing financial risk on their balance sheet, through, for instance, paying back debt and boosting cash reserves. The survey showed that financial risk on corporate balance sheets, after rising for two years, has declined in the third and fourth quarters of 2009.
Credit conditions and sources of funding
Credit conditions, in terms of price and availability of credit, have gradually improved over the last year. Nonetheless credit conditions continue to be more restrictive than they were in 2007. The big change has come in the relative attractiveness of the various sources of funding. Although bank credit as a source of funding has become marginally more attractive to CFOs now compared to last year, bond and equity issuance have become far more attractive ways for CFOs to finance their businesses. With most CFOs believing that now is a good time to issue corporate bonds or equity, the wave of issuance seen in 2009 seems likely to continue into 2010.
Download the full report: The Deloitte CFO Survey 2009 Q4 results (PDF, 521.84 KB).
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