This was according to Deloitte’s latest UK CFO survey, which found that 83 per cent of CFOs now rate the level of uncertainty facing their business as above normal, high or very high – the highest reading in more than three years.
In fact, Ian Stewart, chief economist at Deloitte, said: “A fog of uncertainty has descended on the corporate sector. Perceptions of financial and economic uncertainty are back to levels last seen in early 2013 as the euro crisis abated.”
Furthermore, the referendum is ranked ahead of longstanding concerns such as economic weakness in the euro area and weak demand in the UK.
“This is due to there being a period of prolonged uncertainty about the tax, regulatory, legal and trading relationships in the event of a Brexit,” Stewart said. “We’ve seen in the last ten years that this kind of uncertainty can be associated with a drying-up of liquidity, volatility in the financial markets, a decline in risk appetite and a decline in the value of assets.”
As such, Deloitte’s survey, which questioned 120 CFO of the FTSE 350 and other large private companies, found support for the EU is increasing. Some 75 per cent of UK CFOs believed it would be in the best interest of British firms to forgo a Brexit – a figure which has grown from 62 per cent in 2015. Only eight per cent said that UK business would benefit from leaving the EU.
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- The EU debate: A critical role for business
- Our readers have their say on whether a Brexit would negatively impact their companies
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But despite there being a 50 per cent chance that the UK will break free from the EU, only 26 per cent of CFOs have made, or are in the process of making, contingency plans for a possible British exit. Some 53 per cent made no such plans while 20 per cent preferred not to say.
Stewart suggested firms were unprepared as most opinion polls continued to show a lead for the remain vote – “so CFOs may well see that as the most likely outcome”.
“Alternatively, they may feel that there are just too many uncertainties which hamper the ability to plan for it,” he said. “Also, what we’ve seen in the past with these external events – like Grexit or the Scottish independence vote – is that planning tends to take place quite late.””
However, the survey indicates “the unsettling effect of the referendum on business sentiment” is already being felt, according to David Sproul, senior partner and CEO of Deloitte.
For example, risk appetite is declining among CFOs, with only 25 per cent saying now is a good time to take greater risk onto their balance sheets. There has also been a decline in M&A activity – only 18 per cent suggested expanding by acquisition was a high priority, highlighting that CFOs were now favouring defensive strategies.
On Thursday 23 June, the UK will vote on whether it wishes to remain in the EU. Karen Bexley, head of employment law at MLP Law, takes a look at the Brexit debate and gives comment on some of the potential changes to employment law following the referendum.
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