Business confidence has bounced back among finance leaders since the start of the year, with many considering artificial intelligence as the driving force for investment and productivity
Around 25% of CFOs reported being more optimistic about the financial prospects of their business than they were in January, according to the latest Deloitte CFO quarterly survey.
Going forward, CFOs cited increasing cash flow (48%), reducing costs (43%) and lower borrowing costs (24%) as their top priorities. However, they expect cuts to overall capital expenditure, hiring and discretionary spending over the next year.
Only 39% ranked economic uncertainty as a substantial risk to their business – down from 71% in Q4 2022.
Brexit, high energy prices and disrupted energy supplies posed significantly less risk to businesses than they did in Q4 2022, eased as a result of the Windsor Framework, announced in February.
In addition, falling energy prices reduced risk levels as wholesale gas prices decreased by almost 70% since CFOs were last surveyed.
However, two thirds were concerned about rising geopolitical risks worldwide, including the war in Ukraine.
This was followed by persistent labour shortages (56%) and the prospect of further interest rate rises and the tightening of monetary conditions in the UK and US (58%).
Ian Stewart, chief economist at Deloitte, said: ‘The economic unpredictability that marked the beginning of 2023 has started to clear, with CFOs reporting the largest decline in perceptions of uncertainty to date.
‘Business confidence has rebounded, helped by a decrease in energy prices, an easing of Brexit concerns and an improving inflation backdrop.
‘Crucially, finance leaders report little change in credit conditions, suggesting that March’s events in the global banking system have not affected the pricing and availability of credit for UK corporates. Despite a brighter outlook, CFOs are alive to the continued risks facing the economy. Corporates remain in defensive mode and CFO risk appetite is subdued.’
CFOs reported some easing in recruitment difficulties and expected inflation rates to fall to 4.2% within a year, although they do not expect a return to the 2% level for several years.
Meanwhile, the majority of CFOs (75%) surveyed expect to see a significant growth in capital spending on artificial intelligence over the next five years.
Around 67% also believe the adoption and application of artificial intelligence will help raise UK productivity – although some believe it has the potential to reduce jobs overall.
Stewart added: ‘The CFOs foresee artificial intelligence helping to drive UK productivity, an outcome that could provide a lasting boost to business growth. They are divided, however, on how AI will affect the number of jobs in the economy, highlighting the need to ensure the gains from new technologies are widely shared.’
This is the 63rd quarterly survey of CFOs, conducted between 21 March and 3 April 2023. It involved a total of 64 CFOs, including the CFOs of 11 FTSE 100 and 24 FTSE 250 companies – with a combined market value of the 38 UK-listed companies surveyed is £253bn.
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