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The Deloitte CFO Survey: 2009 Q3 results

Caution rules


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The Deloitte CFO Survey: 2009 Q3 resultsAbout 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. 120 CFOs accounting for approximately 27% of the quoted UK equity market took part in the latest survey, carried out in September 2009.

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 in four of its Inflation 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 Q3 results: Caution rules

The 2009 third quarter Deloitte Chief Financial Officer survey, published on 19th October 2009, shows that despite doubts about the timing and magnitude of the recovery, UK CFOs have become markedly more optimistic about financial prospects for their own companies.

Greater optimism but sluggish recovery

CFO sentiment about prospects for their own companies rose to the highest level since the Survey started in September 2007. The mood, however, is hardly euphoric. CFOs think that recovery in their own markets will only come slowly. 73% of CFOs are expecting growth in their own markets to remain sluggish next year and 12% expect an outright contraction. Just 14% of CFOs expect a return to normal or trend growth rates in their markets next year.

This caution about the pace of the upturn is reflected in CFOs’ plans for their own businesses between now and the end of this year. Most CFOs are not yet contemplating increasing hiring or raising hours for existing employees. Capital spending and corporate acquisitions are the two areas of greatest interest to corporates at the moment, with 39% of corporates contemplating making corporate acquisitions and 34% considering increasing capital spending this year.

Optimism about M&A and private equity activity in the UK over the next 12 months has also now reached the highest levels since September 2007.

Financial conservatism

70% of CFOs believe that the recession and the credit crunch would cause lasting change to the way in which corporates structure their balance sheets. Most of the CFOs think the corporate sector is entering a new era of lower gearing and greater financial conservatism. They also believe that over the next few years, corporates will focus on building up higher levels of cash or liquid reserves and rely more on equity and corporate bond finance and less on bank borrowing.

These changes are already starting to make themselves felt. Bank borrowing has gone from being the most attractive to the least attractive form of finance in the space of just over two years. Wholesale financial markets, rather than banks, are now seen as offering corporates the most attractive sources of external finance through equity and corporate bond markets. 18% of CFOs say they have used capital markets to raise finance to repay bank borrowing this year and a further 19% say they are likely to do so.

Credit costly and in short supply

The great majority of CFOs believe that short term interest rates are at low levels. Yet sharply lower market interest rates do not appear to be translating into proportionate declines in the cost of corporate credit. The majority of CFOs continue to rate credit as being costly although perceptions of the cost of credit have fallen over the last year. Similarly credit availability has improved from last year’s lows, but most CFOs report credit remains hard to obtain. This situation is not expected to change quickly. 81% of CFOs do not believe that bank lending to corporates will increase until the middle of next year or later.

Download the full report: The Deloitte CFO Survey 2009 Q3 results (PDF, 853.36 KB).

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

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