According to a survey recently released by the Deloitte professional services firm, the heads of Britain’s largest businesses don’t see smooth financial sailing ahead. Instead, the UK finance chiefs surveyed expect a return to recessionary times in Britain as the euro continues to weaken going into 2012. The Deloitte survey reveals the UK analysts predict the continued decline of the euro will have a distinct negative impact on UK businesses, causing even more credit problems and volatility in asset prices and exchange rates.
The Deloitte firm surveyed 94 chief financial officers, including those of 32 FTSE 100 and 32 FTSE 250 companies, and found that those officers expect a 37% probability that one or more current member states will leave the euro this year. The number of businesses who rated their level of financial uncertainty and as “high” or “very high” doubled from the summer and the word is that most CFOs are expecting things to get even worse. The survey also found that the number of respondents rating the chance of the UK entering another recession had also doubled in the last six months, with 64% of respondents saying they expect the financial weakness to last more than a year.
Deloitte’s chief economist, Ian Stewart said of the survey, “Against such a backdrop it is no surprise that a return to recession in the UK is, after the euro, the second-biggest concern for CFOs in 2012. CFOs are now working on the assumption that Britain will fall back into recession.” The fact that many UK CFO’s are now reporting the sharpest decline in credit availability since the third quarter of 2008 shows that the financial stress is already having a negative effect on corporate spending. A full 87% of the CFOs surveyed said they thought it was a bad time to take on any additional risks.
Businesses in the UK that might have approached 2011 with a focus on expanding into new markets and increasing capital spending, now face 2012 with an emphasis on cutting costs and increasing cash flow. While it is true that there are definitely fewer market opportunities for UK businesses today, on a brighter note the survey also found that nearly 50% of large UK businesses believe they can profit from the current economic environment because troubled times can also represent growth opportunities.
