Finance directors at big firms in the UK have grown substantially more confident since 2020.
Deloitte’s study of CFOs revealed that their morale increased as their concerns about rising energy prices and Brexit issues faded.
Three months ago, only 17% of CFOs felt the opposite way. Now, 25% more CFOs feel better about the future than feel worse.
The last time there was such a change in confidence amongst big firms in the UK was before the Covid vaccine came out.
Ian Stewart, the chief economist at Deloitte, said that improvements on several fronts at the same time were responsible for the comeback amongst big firms in the UK.
Since the start of the year, energy prices have gone down, inflation has peaked, relations with the EU have improved since the Windsor framework, and there has been a period of relative political calm after last year’s chaos.
The survey was done from March 21 to April 3. This was after the Silicon Valley Bank in the US failed, and Credit Suisse and UBS were forced to merge.
Even though these events made people worry about the banking sector’s health, the CFOs of the big firms in the UK said that the cost and availability of credit hadn’t changed much.
Most of the big firms in the UK CFOs surveyed work for large companies that often have operations around the world. Mr. Stewart agreed that their experience sometimes differed from that of smaller companies, where the number of bankrupt companies has risen sharply.
Even though their mood has changed, chief financial officers of the big firms in the UK still don’t like taking risks. Many say cutting costs and building up cash reserves are their top priorities. This is bad news for the government, which wants businesses to invest now to help the economy grow in the future.
Investing in artificial intelligence is one exception. Deloitte found that most chief financial officers think that spending on AI will grow a lot in the next five years. However, they were split on whether this would lead to more or fewer employees.
The UK economy has been having trouble recently because of high gas prices, rising interest rates, and slow trade. As a result, investment in businesses has also been low.
The International Monetary Fund said last week that Britain’s economy would shrink by 0.3% this year, making it one of the worst-performing major economies in the world.
But this prediction is slightly better than the previous one, which said the economy would shrink by 0.6% in January. And a separate report from the EY Item Club came out on Monday. It says that the UK is expected to grow by 0.2% this year, better than the previous prediction of a 0.7% drop.
The UK chair of EY, Hywel Ball, said that the economy “seems to be turning a corner, albeit slowly,” but that the problems “haven’t gone away overnight.”
The UK economy recovers as big firms restates their confidence
The British economy is “back,” says Chancellor Jeremy Hunt and his plan for growth were praised at a meeting of the IMF in Washington.
Kwasi Kwarteng, who was in charge before him, left the last IMF conference in October without warning after getting a lot of bad press.
Mr. Hunt said the international lending group had told him he was “getting Britain’s economy back on track.”
But the latest data show that the UK economy did not grow in February.
The IMF said that Britain’s economy would shrink by 0.3% in 2023, making it one of the major economies that did the worst around the world.
When asked if the way the UK is doing now makes his message less positive, Mr. Hunt said, “Other finance ministers tell me Britain’s economy is back.”
After months of strikes, quickly rising prices, and a lack of workers, the British economy has just returned to where it was before the pandemic.
On Friday, nurses in the RCN union turned down a 5% pay raise and said they would go on strike again in early May. In England, junior doctors with the NHS went on strike for four days over pay. The strike ended at 7:00 a.m. on Saturday.
The ONS says that the recent wave of strikes in the UK has contributed to the lack of growth in the country this week, even though the big firms in the UK have reported an increase in confidence.
On the other hand, Mr. Hunt stressed how important it was to keep inflation from going up by not raising wages. He said that Britain had not gone into recession “so far” this year and thought growth would increase and inflation would go down in the next few months.
He also said that the things in his March budget, like more money for childcare, that help businesses hire more workers and invest more, should help the economy grow.
Read Also: Chancellor Hunt: Britain’s economy is back
Last year, when Prime Minister Liz Truss was in office for a short time, investors lost faith in the country when Mr. Kwarteng presented an economic plan that promised significant tax cuts without saying how they would be paid.
The outlook for the UK could be covered by the instability amongst the big firms in the UK, particularly, the banking sector, which has been caused by the failure of three American banks and UBS’s emergency takeover of Credit Suisse.
On the other hand, Mr. Hunt said that the UK has a “very strong and resilient banking sector” that is in much better shape than before the 2008 financial crisis.
While the government is thinking about changing some of the rules implemented after the 2008 financial crisis to govern financial services, Mr. Hunt said the goal is to “absolutely not forget what we learned from the financial crisis.”
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