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The Deloitte CFO Survey: 2010 Q1 results

Financial repair, economic uncertainty: 2010 Q1 results

2010 Q1 Results

The 2010 first quarter Deloitte Chief Financial Officer Survey, published on 12th April 2010, paints a mixed picture of economic caution combined with improving financial conditions for corporates.

UK CFOs remain cautious about the recovery. 82% of CFOs surveyed expect a sluggish recovery, and the average CFO sees a one third chance of the UK economy suffering a double dip, what we define as a renewed period of several months of contracting economic activity.

Against a backdrop of economic uncertainty, CFO optimism saw a modest decline, the first fall in 18 months. Optimism has eased back even though CFOs said that their company’s revenues have, on balance, come in stronger than expected so far this year.

This quarter’s special questions look at the political scene. 93% of CFOs think a hung parliament would be negative for the UK economy. There was a clear consensus among CFOs about what the next government needs to do – 85% of them said deficit reduction should be the next government’s priority.

The good news from this quarter’s survey is that the financial environment for larger corporates is continuing to improve. Corporate credit availability has returned to pre-recessionary levels and bank borrowing is starting to regain popularity. For the first time since the survey started in 2007, all three forms of external finance – bank borrowing, corporate bond issuance and equity issuance, are rated as being attractive by a balance of CFOs. None of this is to argue that financing conditions for corporates are back to normal. Even among the large, quoted corporates, most continue to rate credit as “hard to get” and “costly”.

CFOs have also significantly reduced financial risk on their balance sheet over the last year, but this process seems to be drawing to a close. In the first quarter 2010 survey, the willingness of CFOs to take risk onto their balance sheets rose to levels last seen in late 2007.

What emerges from this quarter’s Survey is that financing conditions are getting better. But the Survey also shows that CFOs still have plenty to worry about in terms of the pace of the recovery and the election.

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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 300 CFOs, mainly from FTSE 350 companies, have joined the CFO Survey panel. 141 CFOs took part in the latest survey, carried out in March 2010. CFOs of 101 listed companies, accounting for approximately 33% of the quoted UK 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 meetings.

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

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