Deloitte Monday Briefing: CFO Survey Shows Record Corporate Risk Appetite

The first quarter Deloitte Survey of UK Chief Financial Officers is published this morning. This is the 27th CFO survey and it shows that corporates are gearing up for investment and expansion. 126 CFOs, including 27 at FTSE100 companies, took part in the survey between 6th and 24th March. Respondent companies account for 26% of the quoted UK equity market. The full survey report is available at: http://www.deloitte.com/view/en_GB/uk/research-and-intelligence/deloitte-research-uk/the-deloitte-cfo-survey/index.htm

Significantly reduced economic uncertainty and much improved financing conditions have helped drive corporate risk appetite to record levels. 71% of CFOs say now is a good time to take risk on to their balance sheet, the highest reading in six-and-a-half years, and more twice the level of a year ago. The environment for business is continuing to improve. Our economic and financial uncertainty index has fallen by one third over the last year. Easy monetary policy and favourable financing conditions have created a capital-rich environment for big UK corporates. CFOs report that credit is more available, and more keenly priced, than at any than at any time in the last six-and-a-half years. A period of corporate deleveraging seems to be over and CFOs increasingly see scope for companies to raise leverage. Expectations for equity issuance and bank borrowing have seen a strong recovery since the lows in late 2011. The default position of large corporates in the past six years - bullish on emerging markets, cautious on developed markets - seems to be reversing. CFOs have become more confident about growth in developed economies, particularly the UK. CFOs increasingly see growth here in the UK, and established markets such as the US and Euro area, as the key drivers of their corporate investment plans. Plans for hiring, capital spending and discretionary spending are at new three-and-a-half-year highs. A record 95% of CFOs expect merger and acquisition activity to rise over the next year. CFOs have become markedly more confident about the outlook for UK inflation. Last quarter a majority expected CPI inflation to significantly overshoot its 2.0% target in 2 years' time. Most now expect inflation to be around 2.0%. On average CFOs expect interest rates to rise by 0.25% over the next year. Consumer spending has been a significant driver of the early stages of the UK recovery. This quarter's CFO Survey suggests that the corporate spending...