"Unprecedented Rise in Business Sentiment" Hints at Economic Upturn in Early 2020
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Business confidence has surged amongst the UK's CFOs following the December General Election result, according to the latest Deloitte CFO Survey.
Deloitte report "an unprecedented rise in business sentiment" in then fourth quarter of 2019, a survey that took place in the wake of the General Election.
Between 13th December and 6th January, "confidence has seen the largest increase in the 11-year history of the survey taking it to its highest ever level," says Deloitte.
The findings add to growing evidence that the UK could see a jump in economic activity in 2020 as businesses unlock investment held back prior to the December 2019 election that gave a result that put to bed years of political and Brexit uncertainty.
Image courtesy of Deloitte
The CFO survey follows the release of Services PMI data that showed a notable improvement in sentiment amongst those businesses that responded to the PMI survey following the election result. Halifax house price data for December meanwhile showed UK house prices grew at their fastest rate in 13 years in December, with the election result seen as being behind an uptick in activity.
According to Deloitte, the scale of the improvement eclipses previous surges in sentiment, these include the interest rate cuts during the financial crisis in 2009 and following the European Central Bank president’s pledge to ”do whatever it takes” to save the euro area in early 2012.
"The fog of uncertainty that has beset the UK since the EU referendum in 2016 seems to be lifting," says Deloitte. "Clarity on the nature and timing of the UK’s formal exit from
the EU, if not future trading arrangements, seems to have bolstered CFO spirits."
Brexit has topped CFOs’ worry list since the EU referendum but has dropped to third place in the fourth quarter as a clear roadmap to a Brexit deal was provided by the election result.
Image courtesy of Deloitte
The prospect of political continuity is also seen having a positive influence on sentiment, now that the threat of a radical hard-left Labour government is no longer a threat hanging over the economy. "An end to the immediate possibility of a radical Labour government, have further reduced political uncertainty," says Deloitte.
Crucially, Deloitte also report that the reduced political uncertainty has prompted a strong rebound in CFO expectations for business investment.
This should allow for a notable uptick in UK economic activity in early 2020, following the months of lacklustre growth that characterised 2019.
