CFOs predict business demand will not recover until after Q2 2021

Finance leaders continue to rank the effects of the COVID-19 pandemic as the top risk to their businesses, followed by rising geopolitical issues and the effects of Brexit, according to Deloitte’s latest CFO survey. 

Almost two-thirds (62%) of CFOs do not expect demand for their own businesses to recover to pre-pandemic levels until after Q2 2021, up from just under half (49%) in Q2’s survey. 

The Deloitte CFO survey for Q3 2020, which gauges sentiment amongst the UK’s largest businesses, took place between 22^nd September and 6^th October 2020. 

A total of 102 CFOs participated in the latest survey, including CFOs of 21 FTSE 100 and 37 FTSE 250 companies. The combined market value of the UK-listed companies that participated is £417 billion, approximately 20% of the UK quoted equity market.  

CFOs expect the negative effects of the COVID-19 pandemic to overshadow those of Brexit. Seventy-five per cent of CFOs expect the pandemic to have ‘significant’ or ‘severe’ negative effects on their businesses over the next 12 months. By contrast, 23% expect similar negative effects due to Brexit. 

Over three-quarters of finance leaders (78%) expect UK corporates to reduce capital expenditure in the next 12 months, maintaining the sentiment seen in Q2, where the majority (86%) anticipated a decrease. The pandemic has meant businesses have made greater investment in some areas, like technology, while reducing it in others. 

The majority of CFOs surveyed* expect to keep the vast majority of furloughed employees on their payrolls. They expect to retain, on average, 82% of their furloughed staff after the scheme ends in October. 

Ian Stewart, chief economist at Deloitte, commented: “Business leaders expect a longer haul back to pre-COVID levels of activity. Many have scaled back expectations and are focussed on strengthening their businesses and their balance sheets. British businesses are gearing up for a long winter with COVID-19, with a full recovery on the horizon only after next summer.”  

Jodi Birkett, partner at Deloitte in the North West, said: “While expansionary strategies remain on the back burner, it’s encouraging to see that staff retention is still a priority for business leaders. Facing a combination of COVID-19 and Brexit, businesses need to find ways to adapt and transform. Investment in technology, innovation and skills will be a critical factor for north west businesses in their recovery from this crisis.”