Businesses Downbeat On Brexit Despite Stockmarkets Storming Ahead

The result marks the highest proportion of negative responses to the Deloitte CFO Survey since the EU referendum in June 2016. 

At the same time, just 4% of CFOs think now is a good time to take greater risk onto their balance sheets, the lowest number since the 2008 crisis, and just 9% have a more optimistic outlook for their companies than three months ago, down from 13% in the previous quarter.

Yet despite this corporate pessimism, investors appear to remain unperturbed, with the FTSE 100 storming ahead past the 7,600 mark.

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Ian Stewart, chief economist at Deloitte said: "Equity valuations imply that investors believe central banks will save the day, but the downbeat mood of UK CFOs suggests corporates are less sanguine."

Preparing for Brexit

The corporate response can be explained by Brexit worries, according to Stewart: "Events in the last three years, and recent news suggesting the economy shrank in the second quarter, have added to worries about the impact of Brexit," he said.

Businesses appear to be getting ready to respond to the pressures of Brexit, too: the majority of CFOs (62%) expect to reduce hiring in the next three years as a result of Brexit, almost half (47%) expect to cut capital spending, and a quarter are cutting M&A.

At the same time, corporates are also sticking to defensive strategies, the key priorities being cost control and increasing cash flow.

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Richard Houston, senior partner and chief executive of Deloitte North and South Europe, said: "The continued challenging and uncertain macro-economic environment is weighing on the corporate sector and its job creation and investment plans.

"Companies are looking for more certainty around our country's economic future, as they prepare themselves for a post-Brexit environment."

Overall, Brexit continues to dominate the list of risks faced by businesses, scoring 65 out of 100, closely followed by geopolitical risks with a score of 60.

The Q2 2019 CFO survey took part between 12 and 28 June and encompasses the responses of 79 CFOs, including 48 from FTSE 350 companies.