Expansion back in the North East

CFOS are turning decisively towards expansion and growth according to a new survey

Deloitte offices on Newcastle Quayside
Deloitte offices on Newcastle Quayside

Chief Financial Officers (CFOs) of big businesses are turning decisively toward expansion and growth according to the 25th Deloitte CFO Survey.

The third quarter 2013 CFO Survey, which gauged the views of 116 CFOs, including FTSE 100 companies and FTSE 250 companies, shows that optimism is close to a three year high.

And for the first time since 2011 expansion is a higher priority than cutting costs and building up cash.

A total of 29% of CFOs said that reducing costs is a strong priority for their business, with 35% saying the same about increasing cash flow, down from a peak of 49% in the last quarter of 2012.

More than half (54%) said now is a good time to take risk on their balance sheets, up from 45% in the second quarter and the highest level recorded in six years.

Meanwhile 40% of CFOs say that introducing new products and services or expanding into new markets is a strong priority while expectations for hiring, capital expenditure and discretionary spending in the coming 12 months are also at a three-year high.

Paul Feechan, office senior partner at Deloitte in Newcastle, said: “The findings are consistent with feedback from many of our clients in the North East. The relatively stable economic conditions in 2013, without any significant shocks in the eurozone to date, have delivered improved trading conditions and encouraged investment in new people and capital. This is particularly evident for larger businesses in recovering sectors.

“However, smaller companies and those in sectors where finance remains more difficult to obtain, such as construction and retail, continue to find conditions challenging.”

62% of CFOs say that their business faces a high level of financial and economic uncertainty, down from a high of 97% in the fourth quarter of 2011 and they see just an 8% probability of a country leaving the euro, down from 37% two years ago.

Growth in the UK and eurozone is also expected to provide a boost to their investment plans, but growth closer to home is one of the main factors supporting investment in the coming 12 months, ahead of growth in emerging markets or in the US and Asia.

Ian Stewart, chief economist at Deloitte, added: “A new mood of confidence pervades the third quarter CFO Survey. Chief Financial Officers see fewer risks in the global economy and greater opportunities for expansion.

“The defensive strategies of cost cutting and cash accumulation that saw corporates through the global financial crisis are increasingly out of favour. The priority now is expansion and the balance-sheet cycle has turned decisively towards growth.

“CFOs have become markedly more positive on prospects for growth in the developed world. There’s greater confidence too, that the euro will hold together.

“Emerging markets are a vital source of demand but CFOs are also looking to Europe for expansion.

“In a reversal of the situation six months ago, CFOs believe that UK growth will have a more positive effect on their investment plans in the next year than growth in emerging markets or in the US, Japan and Asia Pacific.

“The mood among corporates has been transformed in the last year.”

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