UK firms are planning to cut costs and hire less, survey shows

Political uncertainty caused by Brexit and weak economic growth are the key concerns of British CFOs, Deloitte found.

    Finance directors in the United Kingdom are responding to political and economic uncertainty by tightening costs, a survey by audit firm Deloitte showed [File: Tom Jacobs/Reuters]
    Finance directors in the United Kingdom are responding to political and economic uncertainty by tightening costs, a survey by audit firm Deloitte showed [File: Tom Jacobs/Reuters]

    Finance directors in the United Kingdom are being forced to cut costs and reduce hiring because of prolonged political uncertainty, according to a survey by consultancy firm Deloitte.

    Seven out of 10 of chief financial officers (CFOs) surveyed said they would reduce hiring in the next 12 months, while almost half will focus on trying to increase cash flow as their companies prepare for an unpredictable year ahead.

    "Perceptions of uncertainty are elevated and corporate risk appetite is vanishingly low," said Ian Stewart, chief economist at Deloitte. "The priority appears to be curbing costs, not expansion."

    The survey of 91 CFOs of some of Britain's largest companies showed that a renewed focus on cost control will be a strong priority for six in 10 of respondents over the next year, the highest level in 10 years.

    In fact, more CFOs are prioritising cost reduction today than they were in late 2009, when the economy was emerging from recession, Deloitte said.

    Only three percent of respondents said they expect to increase hiring over the next 12 months.

    Brexit remains the top concern for finance executives, Deloitte added.

    The UK's economy has been battered by uncertainty over its terms of leaving the European Union. Output shrank in the second quarter when businesses found themselves holding unnecessary stock that had built up before the original leaving date of March 29.

    "With Brexit cited as the biggest risk businesses face, the last quarter has also seen heightened concern over slowing growth in the UK and Eurozone and CFOs are tightening their purse strings in response," Stewart said.

    The report said the resulting uncertainty was now entrenched, while domestic economic factors such as weak productivity and competitiveness are a growing concern.

    With weak demand in Britain becoming the second biggest risk facing companies, expectations of an interest rate cut are also growing.

    The fate of Britain's departure from the EU will become clearer in the next three weeks, ahead of the new Brexit deadline of October 31.

    British Prime Minister Boris Johnson has promised to deliver Brexit by that date. The world's fifth largest economy will either leave with a transition deal, ask for a further delay, or leave without a deal, a move that will likely spark huge economic disruption.

    Deloitte said the combined market value of the 70 UK-listed companies surveyed was 468 billion pounds ($589bn) or approximately 19 percent of the UK quoted equity market. The survey also included some of the biggest unlisted companies in the UK.

    SOURCE: Reuters news agency