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The Deloitte CFO Survey: 2010 Q3 results

Cost control is still king

The Deloitte CFO Survey: 2010 Q2 results

The 2010 third quarter Deloitte Chief Financial Officer Survey, published on 11th October 2010, shows that CFOs believe their businesses are facing elevated levels of economic uncertainty. Their optimism about the financial outlook for their own business dropped in the third quarter to the lowest level since 2009 spring.

While the economic outlook is uncertain, credit conditions have continued to improve. CFOs now see the cost of new credit as being lower than at any time since the CFO Survey started in the third quarter of 2007. Perceptions of credit availability rose sharply in the third quarter. For the first time, more CFOs have rated credit as being “available” than “hard to obtain”.

CFOs think that excessive leverage in the corporate sector as a whole has been largely eliminated. With interest rates seen as being at very low levels and credit increasingly available, CFOs expect to increase their demand for credit over the next year.

Over the last year, the UK has seen an economic recovery, which, by historical standards, has been fairly robust. Nonetheless, CFOs have remained cautious about the sustainability of the recovery. As a result, CFOs have maintained a strong focus on controlling costs. This remained CFOs’ top priority in the third quarter. Cash flow is a lesser concern than a year ago, a change which reflects improved credit availability and stronger corporate cash flow. Expansionary strategies, including introducing new services and expanding by acquisition, feature as prominent priorities and testify to a continued search by the corporate sector for growth opportunities.

Despite all the uncertainties, CFOs are positive on the outlook for corporate revenues and profit margins over the next 12 months. CFOs also see capital expenditure rising over the next year. But, with cost control at the fore, the balance of opinion is that hiring and discretionary spending will shrink over the next year.

So, overall, the good news from this quarter’s CFO Survey is that large UK corporates are finding it easier to raise capital. CFOs are positive on the outlook for corporate revenues and profits; many are looking for growth opportunities. Yet one of the dominant features of this Survey during the recession persists a year into the recovery - in an environment of uncertainty cost control is king.

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About the Deloitte CFO Survey

The Deloitte CFO Survey, launched in 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. In the latest survey, covering the third quarter of 2010, 124 CFOs participated, including CFOs of 35 FTSE 100 and 48 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 95 UK listed companies surveyed is £690billion, or approximately 38% of the UK quoted equity market.

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 several times in its publications such as the quarterly Inflation Report and the monthly Trends in Lending report. The findings have also 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 analyst.

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