Expansionary strategies including the introduction of new products and services, development into new markets and the raising of investment are a greater focus now than at any time since CFOs were first asked about this in 2009. The survey shows that finance leaders are focused on growth, marking a shift away from the defensive balance sheet strategies, including cost control, that have dominated corporate strategies over the last six years.
Conducted in December 2021, Deloitte’s latest quarterly CFO Survey captured sentiment among 85 CFOs, including those of 21 FTSE 100 and 29 FTSE 250 companies, against a backdrop of the emergence of the Omicron variant, the government triggering its ‘Plan B’ restrictions and rising inflation. The combined market value of the 60 UK-listed companies that participated is £493bn, approximately 19% of the UK quoted equity market.
A record number of CFOs – 37% – say increasing capital investment is a strong priority for their business in the year ahead, citing growth in demand at home and abroad, and the climate transition as main drivers of investment. An overwhelming majority of CFOs expect to invest more in digital technology (94%) and workforce skills (77%) over the next three years than in the years before the pandemic.
However, supply chain blockages continue to plague growing numbers of UK businesses, with the Q4 survey showing an uptick in the proportion of CFOs reporting that their businesses have experienced significant or severe supply chain disruption over the past three months, up to 37% compared to 28% in the previous survey. Although respondents expect some easing of constraints, one in five CFOs said they anticipated similar levels of disruption in one year’s time.
Despite rising inflation and the emergence of the Omicron variant, the survey suggests that the CFO appetite for risk has nudged higher. CFOs rate persistent labour shortages, the pandemic, climate change and higher inflation respectively as the top risks facing their businesses. However, compared to this time last year, CFOs have reduced their risk rating for the COVID-19 pandemic, while labour and supply shortages have become significant short-term risks over the last year, as they can lead to a risk of inflation.
In terms of recovery of demand for their own businesses’ products and services, 59% of CFOs state that it had already returned to pre-pandemic levels at the end of 2021. Around a quarter (27%) expect demand to return in Q3 2022 or later, consistent with findings from the previous edition of the survey. Meanwhile, most CFOs (84%) expect productivity to grow faster in the next three years than in the years before the pandemic.
Ian Stewart, chief economist at Deloitte, said: “Like equity markets, which rallied into the new year, CFOs seem to be looking past Omicron and plan to focus their businesses on growth in 2022.
“It is a measure both of the remarkable snap-back in activity from the pandemic and the scale of the challenge today that CFOs rate labour shortages as the greatest risk to business. This is ahead of even the pandemic, in second place. Strikingly, the worries that dominated the risk list in recent years – above all Brexit and weak global growth – have dropped sharply down the risk rankings.”
However, the war for talent remains a sticking point, with almost half of the CFOs surveyed (46%) reporting that their businesses have faced significant or severe recruitment difficulties over the last three months. Things are expected to improve in 2022, with 24% of CFOs expecting significant or severe recruitment difficulties in a year’s time. CFOs also expect productivity to grow faster in the next three years than in the years before the pandemic.
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