UK CFOs say cost reduction remains top business priority
U.K. CFOs say cost reduction is their top business priority over the next 12 months, according to a new Deloitte survey conducted between Sept. 17 and Oct. 1. Sixty-eight percent of those surveyed said it is a strong priority, rising from 53% in Q2.
When weighing the greatest external risks to their business on a 0-100 scale, finance leaders ranked geopolitics highest, with an average score of 67, down slightly from Q2’s 68. Geopolitics has been at the top of business risk concerns for over three years. The second-ranked greatest risk to business, coming in at 65 (up from 59 in Q2), was the possibility of further rate rises and a general tightening of monetary conditions in the U.K. and U.S.
Domestic economic and political uncertainty is the biggest constraint on U.K. competitiveness, according to those surveyed when asked to rank factors that may be limiting competitiveness. This was followed by regulation and taxation. Energy costs came in fourth and labor costs ranked fifth.
CFOs also revised expectations for inflation and interest rates over the next 12 months, with expected inflation to reach 3.4% in one year from now. That is up from 3% in the previous survey. Expectations for the Bank of England interest rates are up to 4% compared to the current 3.75% rate. In light of this, fewer finance leaders are prioritizing expansion efforts, such as introducing new products and services (27% compared to 37% in Q2) and expanding through acquisition (16% compared to 22% in Q2).
“A decade of leadership turnovers, growing political fragmentation and near-constant speculation on tax policy has clouded the backdrop for business,” said Debapratim De, chief economist at Deloitte UK, in a statement. “As the Chancellor prepares to deliver his first Budget, businesses are looking for policy stability, deregulation, and lower, simpler taxes to underpin improved UK competitiveness.”
The surveyed CFOs also weighed in on how AI is impacting business, with 37% expecting the technology to boost margins over the next year. Forty-eight percent expect it to reduce operating costs and 52% say it will reduce headcount over the next year.
“While CFOs are facing an uncertain economic environment, they are increasingly confident in AI’s potential to drive productivity and performance. … The opportunity is not simply to automate today’s work, but to rethink how work gets done, strengthen decision-making and create new sources of growth,” said Darren Graves, Deloitte UK CEO, in a statement.
The Deloitte CFO Survey Q3 received responses from 66 CFOs, including CFOs of 12 FTSE 100 companies and 25 FTSE 250 companies. The remainder were CFOs of U.K. listed companies, large private companies and U.K. subsidiaries of major companies listed overseas.
