A view from London

An overwhelming majority say investment in digital technology and assets by UK businesses will rise over the next five years and nearly three-quarters expect an improvement in productivity and business performance over the same period. With many corporates now well into their AI deployment programmes, a sizeable proportion of respondents also expect productivity gains over the coming 12 months.

This quarter we also asked CFOs to assess key drivers of demand for graduates. They reported a wider business impetus for cost control as the biggest hindrance to graduate hiring in the past and next 12 months, ahead of artificial intelligence. They expect the use of AI and outsourcing to be the second and third-biggest dampeners of demand for graduates over the next 12 months.

This edition of the survey saw an easing in CFO perceptions of uncertainty. 47% now rate the level of external financial and economic uncertainty as high or very high, below the post-pandemic average and well below readings in the summer of 2022, after Russia’s invasion of Ukraine. Reduced uncertainty has fed through to relative improvements in sentiment and risk appetite.

CFOs continue to assume a defensive strategy stance though, with cost reduction and cash control their top two priorities for the coming 12 months. There is a discernible tilt away from defensive strategies, with a softer focus on cost control and reducing leverage in this edition of the survey. In keeping with improved risk appetite, CFOs are placing greater emphasis on introducing new products or services, or expanding into new markets, and on making acquisitions.

The global economy has, so far, weathered the shock from the war in Iran better than many had feared. Corporate sentiment and strategies seem to be responding to this relative resilience. Geopolitics remains the top risk facing businesses although concerns have eased somewhat. Worries about the domestic economy persist. CFOs rate poor UK productivity and weak competitiveness as the second biggest risk, assigning it the highest risk rating since we began asking this question in 2014.