UK CFOs are more willing to take risks in 2014 than they have been at any point in the past six-and-a-half years, according to Deloitte.
Research by the Big Four firm found that nearly three-quarters (71%) thought that now is a good time to take greater risk onto their balance sheets, double the level of a year ago.
This explains why 95% of CFOs expect M&A activity to rise over the coming 12 months.
Meanwhile, CFOs’ perceptions of economic risk appear to have plunged over the past year. While 52% still say the level of economic and financial uncertainty facing their business is above normal, high or very high, that is significantly down from 77% in Q1 2013.
When asked to rate factors affecting investment, CFOs were significantly more positively inclined towards UK and euro-area growth than they were six months ago. In a reversal of recent thinking, CFOs now see UK growth as a greater driver of investment than activity in emerging markets.
A net 95% of CFOs said that prospects for economic activity in the UK have improved over the past six months, 70% said that the outlook in the US has got better and 54% believed the outlook for the euro area is brighter. The net percentage for the prospects for the emerging markets and developing economies was -52%.
Reflecting greater optimism about market conditions, a net 81% of CFOs expect UK corporates to hire more staff over the next 12 months, 80% expect increases in capital expenditure and 36% predict a rise in discretionary spending. These are the highest levels in three-and-a-half years.
Furthermore, CFOs say credit is cheaper and more easily available than at any time in the past six-and-a-half years.
There is an increasing perception among CFOs that companies have scope to raise leverage. Over a third (37%) of CFOs say corporate balance sheets are underleveraged.
Commenting on the results, Ian Stewart, chief economist at Deloitte, said: ”The default position of large corporates in the past six years – bullish on emerging markets, cautious on developed markets – seems to be reversing.
“CFOs are now more confident about growth in developed economies, particularly the UK.”
Sally Percy is editor of The Treasurer