Geopolitical risk dominates for CFOs

Confidence among the CFOs of the UK’s largest businesses has fallen sharply in the wake of the conflict in the Middle East. The latest Deloitte CFO Survey shows that business optimism has dropped to the lowest levels since the start of the pandemic, six years ago.

As has been the case for the last three years CFOs cite geopolitics as the top external risk facing their businesses, but with levels of concern around geopolitics this quarter reaching the highest level on record. CFOs rate rising energy prices as the second greatest external risk to their businesses. Having abated in our last survey, in December, concern around inflation and interest rates has risen sharply. With financial markets during the survey period pricing a 50bp increase in UK interest rates by the end of 2026 – rather than 50bp of cuts that were expected last December – interest rate worries have shot up the CFO risk list and now rank in third place.

Along with energy costs, inflation and interest rates, CFOs see cyber-attacks as a key vector through which adverse geopolitical events are likely to affect their own businesses.

The conflict in the Middle East is shaping CFO sentiment in much the same way that the invasion of Ukraine did. Today, as in 2022, perceptions of external uncertainty are running at high levels while businesses are closely focused on the risks posed by geopolitics, high energy prices and rising interest rates. A more challenging environment has led CFOs to scale back expectations for margins and to sharpen their focus on cost reduction and cash conservation.