UK companies prioritize cost cuts as inflation expectations rise
British boardrooms are turning more defensive as finance chiefs expect inflation and borrowing costs to stay elevated over the next year. The shift comes two weeks before finance minister John Healey's first budget, with cost reduction and geopolitical uncertainty ranking among the main business concerns.
Highlights
- Deloitte's latest CFO survey shows UK inflation expectations rising to 3.4% from 3.0%, with interest rates forecast at 4.0% in a year.
- Sixty-eight percent of CFOs at large UK companies now prioritize cost-cutting for the next 12 months, up from 53% previously.
- Perceived risk from further rate rises increased to 65%, while geopolitics remains the biggest concern at 67% among surveyed CFOs.
Deloitte survey signals growing pressure on corporate planning
As reported by Reuters, citing Deloitte, chief financial officers at large British companies now expect inflation to reach 3.4% in a year's time, up from 3.0% in the previous quarterly survey. They also expect the Bank of England's key interest rate to stand at 4.0% in a year, above its current level of 3.75%.The quarterly survey, which is monitored by the government and the Bank of England as a gauge of sentiment in British boardrooms, also finds that the share of CFOs describing credit as costly has hit a two-and-a-half-year high. Deloitte chief economist Debapratim De says a decade of leadership turnovers, growing political fragmentation and near-constant speculation on tax policy has clouded the backdrop for business.
The survey covers 66 CFOs, including those from 12 FTSE 100 and 25 FTSE 250 companies, and was conducted between Sept. 17 and Oct. 1.
Cost reduction and geopolitics top business risks
Cost-cutting is becoming a stronger priority across large UK companies, with 68% of CFOs rating it as a strong focus for the next 12 months, up from 53% in the previous survey. That points to a more cautious stance on spending and operations as executives prepare for persistent price and financing pressures.CFOs rank the prospect of further rate rises in Britain and the U.S. as the second-biggest risk to their businesses, with a score of 65%, up from 59% in the prior quarter. Geopolitics remains the top concern at 67%, underscoring how external shocks continue to weigh on corporate decision-making.
Our earlier article on the Federal Reserve’s outlook for further rate hikes examined how policymakers are keeping the door open to additional tightening as inflation stays above target. We noted that resilient growth and labor markets, along with risks from AI-related investment, tariffs, and higher energy costs, could keep price pressures elevated and delay any shift toward rate cuts.
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