Scalebacks in British business spending.
Worries about the eurozone and shaky prospects for the wider global economy have dented confidence among bosses of the UK’s biggest companies, according to a survey.
There is growing uncertainty among business leaders over the UK’s planned referendum on EU membership, with support for staying in the bloc waning significantly over the past six months.
Confidence back to 2012 levels
Almost a third of the 137 CFOs surveyed, or 30%, said they were less optimistic about the prospects for their companies compared with three months ago. That was up from 20% feeling more downbeat when asked six months earlier. Just 12% said they were more optimistic in the latest poll, down from 36% six months earlier.
As a result, risk appetite was also down and the pace of hiring and capital spending was likely to slow in coming months, said Deloitte’s chief economist Ian Stewart.
Growth prospects
Finance chiefs were broadly optimistic about the UK’s economic prospects in 2016 as well as for the US, the world’s largest economy. But despite stronger than expected growth in the euro area last year, CFOs remained pessimistic about prospects for the region. Levels of confidence about growth in the single currency bloc were lower than for emerging market economies.
The survey also signalled a drop in support among business leaders for the UK to remain in the EU ahead of a referendum on the issue.
Deloitte asked CFOs whether it was in the interests of British business for the UK to remain a member of the EU. In the latest survey, 62% agreed that continued membership was beneficial, down from 74% when the question was asked six months earlier. There was also an increase in the number of those saying that UK business would benefit from leaving, to 6% now compared with just 2% before.
Just over a quarter, or 28%, said their decision depended on the outcome of the prime minister’s renegotiation of UK membership, up from 23% six months earlier. The remaining 4% said they were uncertain of their position.
After almost seven years of interest rates being held at a record low of 0,5%, a potential increase from Bank of England policymakers in coming months represents yet another uncertainty for businesses as they enter 2016.
With low oil prices helping to keep inflation low, financial markets do not point to a rate rise until late 2016 or early 2017.