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Confidence rebounds as CFOs plan for growth in 2011

04 January 2011

  • Optimism among the UK’s largest companies rebounded in Q4 2010 with appetite for risk higher than immediately prior to the recession;
  • CFOs’ top priority for 2011 is expansion, whether by introducing new products or services or through moving into new markets;
  • Finance chiefs are upbeat on revenues and profits;
  • 61% see geographies outside the UK as being the main driver of revenue growth in 2011;
  • CFOs have become markedly more positive about undertaking capital expenditure and taking on new staff;
  • Cost control has dropped down the list of CFO priorities.

CFOs enter 2011 in a more buoyant mood with a new focus on growth, according to the findings of the latest Deloitte CFO Survey. CFO confidence rebounded in the fourth quarter of 2010, regaining much of the ground lost in the second and third quarters. Fears of a double dip have abated from the levels seen earlier in the year.

Finance chiefs at major UK companies are shifting from defensive to expansionary strategies including taking on new staff and undertaking capital expenditure. Corporate risk appetite has risen even more rapidly than optimism, reaching the highest level since the Survey started in the third quarter of 2007. Growing appetite for risk is leading to a willingness to embrace more expansionary balance sheet strategies.

Margaret Ewing, Deloitte partner and vice chairman, commented: “If 2010 was the year of balance sheet rebuilding and cost cutting, then 2011 looks set to be the year in which corporates start spending again. A new emphasis on expansion by the UK’s large companies lends support to the idea that the recovery is likely to broaden out during 2011 aided by growth in private sector hiring and capital spending.”
As they enter 2011, CFOs are increasingly positive on the outlook for revenues and are focussed on growth opportunities. The most frequently cited opportunities are investing or undertaking acquisitions at lower prices, growing organically and expanding in emerging markets.

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.

Ian Stewart, Deloitte chief economist, commented: “These results testify to the way in which larger UK corporates are strongly connected to the global economy and highly dependent on developments in overseas markets. Interestingly, risk appetite is higher among corporates with significant levels of overseas earnings than among UK-focussed corporates.

“For many corporates, 2010 was dominated by the need to cut costs against a backdrop of slow revenue growth. Cost control has now dropped from first to third priority for CFOs. Introducing new products or services or expanding into new markets is the top priority for corporates in 2011. Even risk-averse CFOs rate this as a top priority. Greater confidence seems to be feeding through to corporates’ spending plans. In the last three months, CFOs have become much more positive about hiring and undertaking capital expenditure.”

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. However, improving credit availability and lower cost of borrowing have led to a marked change in attitudes. In Q4 2010, bank borrowing and bond issuance were as popular as they were before the credit crunch started, in 2007. After a period of aggressive corporate debt reduction CFOs believe that the UK corporate sector is no longer over leveraged.

Ian Stewart concluded: “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 Deloitte CFO Survey is that from this position of strength corporates are increasingly planning for growth in 2011.”

Other key findings from the Q4 2010 Deloitte CFO Survey include:

  • CFOs have become more confident about the sustainability of the recovery, seeing only a 27% probability of a ‘double dip’ return to recession - significantly down from 34% in Q3 and 38% in Q2;
  • However, 90% of CFOs rate the general level of external financial and economic uncertainty as being above normal, with 25% believing that uncertainty is at high levels.

- ends -

Notes to editors:

About the Deloitte CFO Survey
This is the 14th quarterly survey of Chief Financial Officers and Group Finance Directors of major companies in the UK. The 2010 fourth quarter survey took place between 7th and 17th December. 126 CFOs participated, including the 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 £690 billion, or approximately 36% of the UK quoted equity market. The Deloitte CFO Survey is the only survey of major corporate users of capital that gauges attitudes to valuations, risk and financing.

For copies of earlier CFO Surveys, please visit

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

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