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Deloitte CFO Survey: Corporates turn defensive

October 10, 2011

  • CFO optimism drops to lowest level in two and a half years;
  • Risk appetite has fallen at the fastest rate in four years;
  • Defensive balance sheet strategies are back in favour;
  • Cost control is the top priority for finance chiefs;
  • Expansion is still a priority for corporates with major overseas footprint;
  • CFOs expect profit margins to narrow over the next 12 months.

Mounting uncertainty about the global economic outlook has seen optimism among the chief financial officers (CFOs) of major UK businesses fall for the third quarter in a row. According to the latest Deloitte CFO Survey, optimism is at its lowest level since early 2009, when the UK was in recession. 43% of CFOs believe that the UK will fall back into recession, up from 33% last quarter.

The proportion of CFOs who say external financial and macroeconomic uncertainty is ‘high’ or ‘very high’ has almost doubled to 46%, from 26% in the previous quarter.

The weaker and more uncertain backdrop has also dented corporate appetite for risk. After peaking in the first half of 2011, risk appetite has fallen at its fastest rate since the Deloitte CFO Survey began in 2007. Risk appetite is lowest in the financial sector and highest in the consumer goods and technology sectors.

The shift in risk aversion has led to a tilt in balance sheet strategies employed by CFOs. For the first time in a year cost control is the top priority for CFOs and capital expenditure and acquisitions have taken a back seat.

Margaret Ewing, a senior Deloitte partner and former FTSE 100 CFO, commented: “This quarter’s CFO Survey shows that uncertainty and weaker growth have had a marked effect not just on corporate sentiment but also on priorities. The world has become riskier and more uncertain for corporates. Most think that a period of margin expansion is drawing to an end. CFOs are responding with a renewed focus on cost control. Expectations of a revival in corporate capital spending and hiring are fading.”

Ian Stewart, chief economist at Deloitte, added: “There is a clear distinction between UK and internationally focussed corporates. Companies which derive 70% or more of their revenues from outside the UK still see expansion as their top priority. Nonetheless, even among this group defensive strategies such as reducing costs and increasing cashflow have gained importance.

“Companies which derive 70% or more of their revenues from the UK are positioned more defensively, prioritising cost reduction and raising cashflow.

“It’s a case of overseas expansion and domestic caution. The bottom line is that finance chiefs see the greatest opportunities for growth lying outside the UK. For UK big businesses, defensive strategies are, once again, to the fore.”

The uncertain economic outlook has made CFOs more cautious about corporate expenditure. While CFOs entered 2011 anticipating that corporate hiring and investment would rise over the coming year, the majority now expect hiring and investment to decline over the next 12 months.

Mr Stewart continued: “Finance chiefs have become more bearish on the outlook for profits. Most see profit margins contracting over the next year, a marked change from the optimism we saw in profits a year ago”.

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Notes to editors:
Key charts from the Q£ 2011 Deloitte CFO Survey:

Chart 1

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Chart 3

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Chart 5


About the Deloitte CFO Survey
This is the 17th quarterly survey of Chief Financial Officers and Group Finance Directors of major companies in the UK. The 2011 third quarter survey took place between 14 September and 28 September. 114 CFOs participated, including the CFOs of 30 FTSE 100 and 41 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 85 UK listed companies surveyed is £535 billion, or approximately 31% 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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Celine Gordine-Wright
Deloitte LLP
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Deloitte LLP
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