The majority of finance chiefs of the UK’s biggest businesses are working on the assumption that Britain will fall back into recession this year, according to a poll of chief financial officers by Deloitte.
Deloitte’s latest CFO Survey reveals that 54% of respondents expect the UK to suffer a double-dip recession this year, up from 27% a year ago.
Furthermore, UK CFOs believe there is a 37% chance of one or more countries exiting the euro in 2012, and see a break-up of the euro as the biggest threat to their firms this year.
Finance chiefs believe the collapse of the euro would have a severe effect on UK businesses, causing a new credit crunch and driving major swings in asset prices and exchange rates.
Ian Stewart, chief economist at Deloitte, says: “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 survey also shows that the proportion of finance chiefs rating the level of external financial and macroeconomic uncertainty facing their business as being ‘high’ or ‘very high’ has more than doubled in the last six months to 56%, up from 26% in the summer.
Meanwhile CFOs are reporting that credit availability has deteriorated at the fastest rate since the collapse of Lehman Brothers in September 2008.
Stewart says: “Those pinning their hopes for growth on a sharp increase in corporate spending in the UK this year may be disappointed. On balance, CFOs expect corporate hiring, investment and discretionary spending to contract in 2012.
“As in late 2008, the top priorities for corporates are cost control and cash flow. However, the story this quarter is not just about battening down hatches. Large UK businesses believe that troubled times also create growth opportunities.
“While CFOs see fewer market opportunities than they did three years ago in the early stages of the recession, almost half believe their business can profit from the current economic environment.”