UK CFO confidence hits lowest level since Covid as Iran war disrupts business outlook
Britain’s finance chiefs have returned to full defensive mode as the fallout from the Iran war sent confidence plummeting to levels not seen since the country entered its first coronavirus lockdown six years ago.
Two of the company’s most closely watched barometers, Deloitte’s monthly CFO survey and BDO’s exit index, paint a picture of a business community that struggles with protracted turbulence rather than plotting growth. The message from the cabins is not clear: save cash, cut costs and wait out the storm.
A Deloitte survey puts CFO confidence at a six-year low, with geopolitics again named as the single biggest external threat. The firm’s chief economist, Ian Stewart, said the Middle East conflict had brought a real shock, bringing hope back to the darkest days of the pandemic. For financial leaders accustomed to dealing with uncertainty, the comparison is sad.
BDO’s figures tell a similarly bleak story. Business manufacturing contracted last month for the first time since February 2021, with services and manufacturing bearing the brunt. Scott Knight, the firm’s head of growth, pointed to rising energy and commodity prices as the main causes, noting that the fragile accord between Washington and Tehran provided a temporary respite.
The continuing effects are already filtering through the economy. High commodity prices are destroying producers, while both businesses and consumers have begun to tighten their belts in anticipation of higher inflation. Deloitte found that business leaders are most concerned about the impact of the war on energy prices, inflation and interest rates, all of which economists expect to rise this year. The prospect of increased cyber attacks, possibly orchestrated by state-sponsored actors, adds another layer of unease.
The labor market is feeling the cold. BDO’s employment index fell to a 15-year low as firms signaled that inflation will reduce their ability to recruit new workers. Employment demand, the accounting firm warned, is likely to remain flat until the end of 2026. A separate report by KPMG and the Recruitment and Employment Association found that full employment and labor demand continued to decline in March, albeit at a better pace than in previous months. Salary increases, described as small.
There is a small thread of hope. Jon Holt, chief executive of KPMG, suggested that the long-term decline in hiring activity may be beginning to slow. Yet he was quick to warn that any meaningful recovery depends on more clarity on the origins of the conflict and its wider economic consequences. Otherwise, he warned, hiring decisions and capital investment risks will be postponed again, halting any further improvement in the labor market.
At the moment, the most important among British financial managers, many taken from the FTSE 100 and FTSE 250, is the strength of the balance sheet. Most told Deloitte they intend to cover expenses and rent in the coming months. As Stewart puts it, rarely in the last 16 years have UK CFOs focused so much on cost control.
It is a situation born not of panic but of hard-headed pragmatism. Until the geopolitical fog lifts and energy markets find some stability, corporate Britain seems content to hunker down and take it out.
