U.K. CFOs See Post-Brexit Cuts in Spending, Hiring, Survey Shows
(Bloomberg) -- Business confidence among U.K. chief financial officers plunged in the wake of the country’s vote to leave the European Union, with more than four in five expecting to cut capital spending and reduce hiring over the next year, a survey showed.
Accounting firm Deloitte LLP polled 132 CFOs of U.K. companies from June 28, five days after the EU referendum, through June 11. The survey showed rising levels of uncertainty and risk aversion and increased pessimism about the economy, compared with a previous survey about three months earlier.
The survey underlines worries that U.K. employers will rein in spending even ahead of official data confirming an expected slowdown in the economy. Companies ranging from British Airways owner International Consolidated Airlines Group SA to real-estate broker Foxtons Group Plc have issued profit warnings since the referendum.
“CFOs do not seem to be waiting for growth to slow before adjusting direction,” Deloitte chief U.K. economist Ian Stewart said in a statement. “There has been a marked shift to more defensive balance-sheet strategies in the wake of the referendum, with a focus on reducing costs, building up cash flow and caution on all forms of spending.”
In the Deloitte survey, 82 percent of CFOs said they expected their employers to reduce capital spending over the next year, while 83 percent predicted a slowdown in hiring. Those figures were up from 34 percent and 29 percent, respectively, in the previous survey.
Ninety-five percent of the executives surveyed said the level of uncertainty facing their business is above normal, high or very high, up from 83 percent in the previous survey. The last time uncertainty was at similar levels was during the height of the Greek debt crisis in 2012. Also, 68 percent said they thought leaving the EU would cause a long-term deterioration in the U.K. business environment.
The survey was conducted amid upheaval in the U.K. political scene that followed the referendum, with former Prime Minister David Cameron announcing his resignation the day after. Now that a new government led by Prime Minister Theresa May has been installed more rapidly than expected, Deloitte said, uncertainty could moderate.
The U.K.’s quarterly earnings season is set to pick up this week with reports from companies ranging from EasyJet Plc to Unilever to Vodafone Group Plc expected to provide an early reading on how finances are being affected by the Brexit vote.