CFOs rediscover taste for expansion
Optimism levels are increasing among chief financial officers (CFOs), with expansion plans rising up their priority lists, according to survey results from Deloitte. The optimism of CFOs working within large businesses is now closing in on a three-year high.
And the business advisory firm, which canvassed the views of 116 CFOs employed by the likes of FTSE 100 and FTSE 250 companies, found that expansion plans are being prioritised more than cost-cutting and building cash reserves for the first time in two years.
The CFO Survey for the third quarter of 2013 revealed that just 29% of CFOs are prioritising cost-reduction measures, while 35% are keen to focus on increasing their company’s cash-flow. In comparison, 40% now aim to prioritise expansions into new markets or favour the development of new products and services. Their hiring, capital expenditure and discretionary spending expectations for the coming 12 months have also reached their highest levels for around three years.
Commenting on the data, Ian Stewart, chief economist at Deloitte, said CFOs are displaying a
“new mood of confidence”, as they now see “fewer risks in the global economy and greater opportunities for expansion”.
Deloitte’s report showed that more than half (54%) of the country’s top CFOs now feel the time is right for them to add some risk to their balance sheets. This is significantly higher than the second-quarter reading of 45%.
Meanwhile, the proportion of respondents who feel their employers face high levels of financial and economic uncertainty has dropped, from 97% in the closing quarter of 2011 to just 62%.
In terms of the UK’s wider economic policy, eight in 10 (82%) CFOs now believe interest rates will rise by the year 2015. The report indicated that many CFOs are sceptical about whether the Bank of England’s ‘forward guidance’ scheme will keep the base rate at 0.5% until 2016 as planned.
Expansion plans take priority
Mr Stewart said “broad-based optimism” is currently evident among CFOs.
He added: “A record 54% of CFOs say that now is a good time to take risk onto their balance sheet. High levels of corporate cash and favourable credit conditions suggest that major corporates have the firepower to invest.”
The expert concluded: “The priority now is expansion and the balance-sheet cycle has turned decisively towards growth.”
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