Business confidence holds up amid Brexit uncertainty

BY Ian Stewart   /  8 January 2018

A personal view from Ian Stewart, Deloitte’s Chief Economist in the UK. Subscribe to & view previous editions at:

The latest Deloitte survey of UK Chief Financial Officers, released this morning, shows the CFOs enter 2018 more focussed on controlling costs than at any time in the last eight years. CFOs seem to be reacting to slower UK growth and Brexit uncertainties with a renewed focus on costs.

In a world of accelerating growth, UK-related risks loom large. CFOs’ concerns about Brexit have mounted in the last three months despite December’s agreement between the UK and the EU to proceed to trade talks. Brexit tops the list of risks for businesses in 2018 with weak UK growth in second place and productivity in third.

Yet a sharper focus on risk and cost control has not led to a collapse in business sentiment. CFOs are more optimistic today than they have been, on average, in the last couple of years.

And far from backing away from expanding their businesses, as happened in previous periods of uncertainty, during the euro crisis and after the EU referendum, CFOs are putting increased weight on growth.

The priority CFOs attach to expansion over the next 12 months, whether organically, through acquisitions, or introducing new products/services or moving into new markets, is at its highest level since we first asked this question in 2009.

So why, in an environment where home-grown risks and cost control loom large, are CFOs still looking for growth opportunities?

Cost control offers a way of countering the risks from weaker UK growth. But beyond the UK activity is accelerating and opportunities are increasing. 2017-2018 looks set to be the best two-year period for growth in Britain’s core export market, the EU, in ten years. Meanwhile the UK economy looks set to cool, not collapse. On average, economists see the UK economy growing this year in line with what the Office of Budget Responsibility believes to be its trend rate. Some CFOs may anticipate an easing of Brexit risks, feel that their own business is less directly affected by Brexit or that they can mitigate the risks.

The backwash from Brexit is the dominant theme for UK corporates today. But it has not crushed the animal spirits of the business sector nor forced a retreat from expansion. We see an underlying resilience in the UK corporate sector.

The central challenge for UK business will be to achieve growth in an environment of stringent cost-control.