CFOs don’t expect recovery until next summer

Almost two-thirds (62%) of finance leaders in the UK believe that demand for their own businesses is unlikely to recover to pre-pandemic levels until after the second quarter of 2021.

Despite the ongoing uncertainty, however, the majority expect to take back furloughed staff, with an average of 82% of employees expected to remain on payrolls after the scheme closes at the end of October.

The Deloitte survey of 102 chief financial officers and group finance directors took place between 22 September and 6 October 2020.

“Business leaders expect a longer haul back to pre-Covid levels of activity,” commented Ian Stewart, chief economist at Deloitte. “With further restrictions coming into effect, businesses have scaled back expectations and are focused 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.”

In other findings, CFOs expect the negative effects of the Covid-19 pandemic to overshadow those of Brexit. Three-quarters (75%) 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.

Hiring and capital expenditure will be reduced more substantially over the next year in the event of the UK leaving the European Union without a deal, however.

Around a third (30%) of finance leaders said they would reduce hiring in the event of a Brexit ‘no-deal’, compared to 15% in a ‘thin-deal’ scenario, which would ensure tariff-free goods trade only. Just over a quarter (26%) of CFOs said they would decrease capital expenditure in a no-deal scenario, compared to 11% in the event of a thin-deal.