Boardrooms gearing up for growth

After Labour’s overwhelming victory in the general election this month, optimism among senior executives of some of Britain’s largest businesses has increased.

According to Deloitte’s latest survey, chief financial officers are more willing to take on risk, and their concerns about uncertainty have receded sharply. They also expect revenue growth.

In the closely-watched survey, which questioned dozens of finance directors, including those from FTSE 350 firms, it was found that a net 23% of respondents felt more optimistic about their business outlook now than in the spring.

Business leaders agree that the results of the elections will have a “mildly-positive effect” on plans for investing, negotiating and hiring over the next year.

Richard Houston, senior partner at Deloitte UK and its chief executive, stated that “we’ve already seen a shift in corporate confidence following the general elections.” This is the fourth consecutive quarter that sentiment has improved. Deloitte reported that uncertainty had clouded business outlooks in recent years.

The UK has been ranked among the most volatile nations for years, but economists and commentators are now saying that the UK is more stable than other developed countries. The polling was done before Rachel Reeves’ warning that the state of the public finances is worse than expected.

Net 23 percent of respondents said that their companies faced high or very high external uncertainty. This is the lowest level of external unrest in over eight years. The easing of uncertainty has led to the highest increase in four years for executives’ willingness to take greater risks, such as adding more debt or making additional investments. Net 36 percent of finance chiefs believe that it is a good moment to increase the risk in their balance sheet. This is the highest level of sentiment since spring 2021 when the British economy began its recovery after the lockdown.

Ian Stewart, Deloitte’s chief economist said, “A more predictable environment has boosted corporate spirits and shows that worries about Brexit, Covid and inflation that have weighed down corporate spirit for most of the past eight years, are clearing.” He said that now that the election is over and risk appetite has improved, “businesses are gearing up for expansion”.

The expectations of finance bosses for revenue growth are at their highest level in the past two-and-a-half years. A net 64 percent of respondents expect to see an increase in top line over the next twelve months. In the spring only net 42 percent of respondents thought that their revenue would rise.

The top identified risk by those surveyed is global politics, which includes wars in Ukraine, Gaza, and the many elections held this year. Deloitte reported that companies are as worried about global politics as they were when the Ukraine war began two years ago.

Most chief financial officers prioritize reducing costs in the coming year. Cashflow is their second priority. The vast majority of respondents to the survey said that they would like to see reforms in industrial policy and plans given priority by the new government.

Houston stated: “Business leaders are keen for Industrial Strategy to top the list of economic priorities for the new government. There is a strong desire to work together to drive growth and productivity. This is crucial to the UK’s inclusive and sustainable future.