UK business confidence at all-time low, Deloitte report reveals

Business confidence at British companies has sunk to an all-time low because of the coronavirus pandemic, according to a survey of finance chiefs at the largest UK firms.

The accountancy group Deloitte found that nine out of 10 finance directors believe there is a high or very high level of uncertainty facing their business.

Deloitte’s latest quarterly survey of chief financial officers took place after the UK was placed into lockdown, and warns that only 16% of executives are more optimistic about the prospects for their company than they were three months ago.

The first-quarter survey gauges the sentiment of more than 100 finance bosses at some of the country’s largest firms, including FTSE350 companies.

The survey has recorded its lowest business confidence reading since it was launched in 2007, even lower than during the global financial crisis, in stark contrast to the final quarter of 2019, when the survey recorded confidence at a record high.

Ian Stewart, chief economist at Deloitte, said the Covid-19 pandemic has seen business confidence plummet from an all-time high following the UK’s December general election, to an all-time low in the space of three months.

“CFOs expect the lockdown to ease in May and June and demand in their own sectors to start recovering later this year. But there is no expectation of a quick snap back in activity, with most CFOs assuming revenues will not return to pre-crisis levels for at least a year,” said Stewart.

Almost all the executives surveyed expect UK corporate revenues to fall over the next 12 months, while the executives expect revenues at their own businesses to be on average 22% lower than they estimated before the pandemic.

The coronavirus crisis has made businesses significantly more risk-averse, with almost all executives surveyed (94%) unwilling to take risk on to their balance sheets.

As a result, 98% of CFOs expect UK business to reduce their capital spending during 2020, with the same percentage anticipating a slowdown in hiring.

Despite government support packages for businesses during the pandemic, finance bosses who responded to the survey reported the tightest squeeze in credit conditions on record, with a significant fall in the availability and cost of debt during the first quarter.

The economic outlook for the UK is gloomy, according to the majority of finance bosses, with over half (53%) forecasting a deep and prolonged downturn in Britain, which lasts until the end of 2020. According the Office for Budget Responsibility, the government’s independent economic forecaster, the economy could shrink by 13% this year.

To weather the new economic environment, three-quarters of the companies surveyed (76%) described reducing costs as a strong priority, as over half the firms (59%) have furloughed employees or (52%) have reduced output and shut down factories. In addition, 30% of firms have accessed or intend to apply to the Bank of England’s Covid-19 corporate financing facility.

Despite facing the most demanding challenges to their businesses in decades, business chiefs are adapting to the new reality, according to Richard Houston, chief executive of north and south Europe at Deloitte, as they look beyond the downturn.

“Almost all finance leaders believe that flexible working will gain ground in the wake of this crisis. We have an opportunity to rethink the future of work in a way that boosts opportunity and innovation,” said Houston.

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