UK corporate sector risk appetite falls to 3-year low amid eurozone worries
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.
After a tumultuous 2015, when a downturn in China and sharp slowdown in global trade prompted big businesses to scale back spending plans, the year ahead will be marked by even more caution, a poll of chief financial officers (CFOs) suggests.
The survey by consultancy Deloitte also signals 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.
The quarterly report chimes with economists’ warnings over a range of risks to the global economic recovery in 2016. It follows a prediction from IMF head Christine Lagarde last week that global growth will be disappointing this year as the prospect of rising interest rates in the US and a further slowdown in China feed into uncertainty around the world.
Business confidence fell for the third quarter running in the Deloitte survey and is now back to where is was in early 2012 when the eurozone was in recession.
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.
“Doubts about the pace and sustainability of the global recovery are weighing on business sentiment,” Stewart added.
“UK corporate sector risk appetite has fallen to a three-and-a-half-year low, mirroring the loss aversion and caution being seen in financial markets… CFOs’ strategies are more defensive than at any time in the past three years.”
