A view from London

The decline in the perceived attractiveness of the US comes after significant downgrades to US growth forecasts in the first half of this year amid concerns about the effect of US tariffs. US assets performed poorly in the first half of 2025, with the US dollar falling by 10% on a trade-weighted basis and US equities underperforming European equities.

Although tariffs remain a material business risk, the announcement of a limited trade agreement between the US and UK in early May, the only one confirmed at the time of the survey, provides greater certainty for UK businesses. Improving CFO sentiment about developed Europe may partly reflect expectations that rising defence spending and EU-wide economic reform in the wake of the Letta and Draghi Reports will boost European growth. According to the latest Bank of America survey, institutional fund managers have pivoted decisively from US to euro area equities, underscoring growing optimism about the region in capital markets. Sentiment about the UK has also improved, but to a lesser extent. 

The findings from the CFO survey fit with a small increase in business sentiment recorded in the latest CBI quarterly survey and a pickup in activity recorded in the June survey of purchasing managers. A swift return to more normal rates of growth in the UK is not on the cards. These surveys suggest weak, although continued UK growth in the coming months. Given the headwinds from geopolitical uncertainty and tariffs, things could be worse.