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UK CFOs are less optimistic and more uncertain about economy now than end of 2015, global survey finds

Publié le
31 Mars 2016

Economic and political uncertainty and currency risk are among major concerns, indicating that a potential Brexit is damaging confidence. UK Financial Executives have the highest understanding among Europeans of recent innovations such as the Blockchain and Smart Contract.


Rebecca Griffiths,
Communications Management
T: 01727 733885

Two thirds of UK CFOs are less optimistic about the country’s economy now compared with the end of last year, according to the latest round of the Global Business Outlook Survey.

70% of Financial Executives cited economic uncertainty is now their major concern, followed by currency risk (47%) and political uncertainty (35%), indicating that the prospect of a Brexit may be damaging confidence in the UK economy.

The survey is conducted by the Fuqua School of Business at Duke University, Grenoble Ecole de Management, CFO Magazine and Tilburg University. The survey, which ended March 4, has been conducted each quarter for the last 20 years. The survey spans the globe, making it the world’s longest-running and most comprehensive research on senior finance executives.

UK CFOs think there is a probability of 25.7% that the country's economy will be in recession at the end of 2016. This is a more positive outlook than many other countries, including half of Brazilian, South African and Greek financial executives, who believe their economies will enter or remain in recession by year-end.

72% of UK CFOs worry that slowdown in Europe is biggest risk that could lead to recession, while 44% cite political risk and budget deficit as other risk factors. One- third also expressed concern about the impact of slowdown in China and other emerging economies.

“This quarter’s findings reveal that UK Financial Executives are less optimistic and more uncertain about the country’s economy than they were at the end of last year. This appears to reflect the ongoing debate around a potential Brexit. Some of the leading concerns include political uncertainty, currency risk and slow-down in Europe, indicating that this issue is keeping CFOs awake at night,” said Philippe Dupuy, Finance Professor at Grenoble Ecole de Management, a partner of the survey.

“At the same time UK CFOs remain more optimistic about the prospect of the economy staying afloat than their counterparts across the globe – in particular half of Brazilian, South African and Greek CFOs believe their economies will enter or remain in recession by year-end.”

Understanding Innovation

UK CFOs claim the highest understanding among Europeans of recent innovations such as the blockchain and smart contract. Around 53% of them say they understand both technologies. This number falls to 30% on average in Europe.

In the UK, nearly a quarter said they have an understanding of Blockchain, compared with just 7% in France, 8% in the Netherlands and 8% in Spain.

Global Economic Outlook

Optimism from U.S. CFOs about the American economy fell slightly this quarter. On a scale from zero to 100, financial executives rate the outlook at 59, down from 60 last quarter and below the long-run average. Top concerns in the U.S. include economic uncertainty, the cost of benefits, difficulty finding qualified employees and regulatory requirements. Health care costs are expected to rise by more than 7 percent in 2016.

Canadian optimism fell to 56 this quarter, down from 59 in December. Canadian CFOs assign a 42 percent chance of recession by year-end 2016. Employment will remain flat and business spending will increase 1 percent at the median firm this year.

Asian optimism averaged about 57 out of 100 this quarter, ranging from 45 in Japan to 56 in China to 69 in India. Chinese and Japanese CFOs believe there is a 33 percent chance of recession in their home countries by year-end, compared to only 10 percent in India and less than 20 percent elsewhere in Asia. Capital spending is expected to increase by 2 percent in Japan, 4 percent in China and about 7 percent averaged across the rest of Asia.
Wages will be stagnant in Japan, but about a 5 percent hike averaged across the rest of Asia. Full-time employment will be flat in Japan, increase 2 percent in China and by about 5 percent in India. Top concerns include economic uncertainty, currency risk, weak demand and governmental policies. Chinese CFOs also worry about productivity.

Optimism in Europe declined to 53 this quarter from 58 last quarter. Wages should increase by just 1 percent and no full-time employment growth is expected. European top concerns include economic uncertainty, government policies, difficulty attracting the right employees and currency risk. European CFOs assign a 30 percent chance of recession by year-end 2016, with chief causes being slowdowns in Europe and China, as well as political risks and budget deficits. The probability of recession is greater than 50 percent in Portugal, Greece and Russia. One-in-nine European firms are exploiting big data in running their firm and another 30 percent plan to soon adopt the technology. Many fewer firms plan to implement bitcoin, Blockchain or other recent technological advances.

African optimism remains low (46 out of 100, down from 49 last quarter) and is only 38 in South Africa. Sixty percent of South African CFOs expect a recession by year-end, in contrast to 35 percent in Nigeria. Employment is expected to fall by nearly 2 percent in 2016. Capital spending will rise by 2.4 percent on average, with nearly a 10 percent increase in Nigeria, offsetting a 2.3 percent reduction in South Africa. African CFOs are worried about currency risk, economic uncertainty, government policies and limited access to capital.

Latin American economic optimism remains low (45 on a 100 point scale), though it is a region of contrasts. Optimism in Brazil and Chile is extremely low (about 37), but strong in Mexico (70) and Peru (63). Three-fourths of CFOs in Brazil and Ecuador expect their countries to be in recession at year-end. That’s compared to 34 percent in Chile, 30 percent in Mexico and 19 percent in Peru. Averaged across Latin America, capital spending in expected to rise 3.7 percent in 2016, with a positive outlook in all responding countries. Full-time employment will fall by 5 percent in Brazil and Ecuador and fall by 2 percent in Chile, while increasing by a median 3 percent in Mexico.

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