CFOs Give Glimpses on How British Businesses Have Been Permanently Altered by Covid-19 Pandemic
- Largest ever collapse in confidence seen amongst UK CFOs
- CFOs see recovery starting in late 2020
- But pre-coronavirus activity only likely in 2021
- Nearly all companies to embrace flexible working
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The confidence levels amongst the Chief Financial Officers of the UK's largest companies has plummeted to the lowest levels ever recorded by the Deloitte CFO Survey, due to the covid-19 pandemic and the lockdown of the global economy.
According to Deloitte, confidence among CFOs has declined to its lowest ever level, well below the trough at the height of the financial crisis in 2008, and the crisis has fundamentally shifted how business will be conducted in the future.
The sharp plummeting in confidence comes just months after the same survey reported its largest ever spike in confidence, owing to the decisive outcome of the UK's December general election that put an end to months of acute domestic political uncertainty.
The about-turn in prospects for the UK's largest businesses will confirm the UK economy has shrunk at an extraordinary pace in the space of a few weeks following the decision to shutdown customer-facing businesses and ban all but essential travel for work.
However, the scale of the Government's support packages cannot be underestimated as the survey suggests the collapse in economic activity might have been significantly worse were it not for measures implemented by the Treasury and the Bank of England.
The CFO survey shows 59% of CFOs have already furloughed or intend to furlough staff, 33% are diversifying suppliers and 30% have accessed or intend to access the Bank of England’s COVID-19 Corporate Financing Facility.
"CFOs are overwhelmingly positive about the measures introduced by the government and the Bank to support business, with a particularly positive view of the Coronavirus Job Retention Scheme to protect jobs," reads the report.
Understandably, business strategy appears to have shifted away from growth to survival with CFOs reporting a priority to strengthening balance sheets.
"Businesses have never adopted a more defensive stance, with an unprecedented focus on cost control, cash conservation, selling assets and debt reduction or deleveraging," says the report.
The prospect of an economic recovery does however mean expectations for a return to growth in 2020 are shared by the majority of CFOs.
CFOs expect growth to begin to return in the coming months. 41% of CFOs expect the lockdown to start to ease in May and a further 41% expect it to begin in June. 76% of respondents say they expect demand for their own products and services to revive later this year,
Yet there is no expectation of a quick snapback in activity in the second half of the year.
Most CFOs do not expect demand for their products and services to return to pre-COVID-19 levels until 2021, with 53% warning that peak levels of activity will be only regained sometime after mid-2021.
Expect how business is done to be changed forever by the crisis, as CFOs see COVID-19 causing lasting change in the business sector and a strong focus on business resilience.
Most CFOs expect to see significant increases in pandemic planning and most believe supply chains will become more diverse and resilient.
"Flexible working is seen as the big winner, with 98% of CFOs expecting it to increase as a result of the crisis," says the Deloitte Report.
Furthermore, CFOs believe the post-COVID-19 world will see a greater role for the state and higher levels of corporate and household taxation.