Lower costs and higher cash flow are 2012 priorities for UK businesses
From Macro News Jan 3 2012 BY: Gary Corcoran
, Group Editor
, Portfolio Adviser and International Adviser
In among the doom and gloom of a feared recession in 2012, chief financial officers of some of the UK’s largest firms still see the positives of new opportunities and stronger balance sheets.
In a recent survey from Deloitte, nearly half (48%) of the 94 CFOs who took part said that “troubled times create new opportunities”, with one third of them seeing the acquisition of undervalued assets as one of them.
Nearly 20% believe tough economic conditions give them a chance to bring in overdue changes to their business operating models.
A minority, but still a substantial 12% of CFOs surveyed, “plan to develop new offerings to meet needs created by a difficult macro environment”.
Reducing costs and increasing cash flow are the two prime objectives of UK businesses for this year, identical to how companies reacted in 2008 to the collapse of Lehman Brothers, with the Deloitte report adding: “Concerns about the future of the euro and uncertainties about the outlook for growth have acted in the same way today, pushing cost control and cash flow back to the top of CFO’s priority list”.
Their biggest challenges remain financial stress and uncertainty, with a break-up of the euro as the main threat. One CFO commented that this threat could potentially bring a second credit crunch.
“UK corporates have been unconvinced by the response of European politicians and policymakers to the crisis. On average our respondents see a high probability, 37%, that one or more member states will leave the single currency in the course of 2012,” the report’s authors added.
More than half (54%) see the possibility of the UK suffering a double-dip recession with, at the very least, current weaknesses to continue for another year as they have just seen the sharpest decline in credit availability since Q3 2008.
Their conclusion is: “Perhaps most of all, the survey demonstrates how external risk blunts corporates’ appetite for expansion. By and large big corporates in the UK, the euro area and the US have the firepower to spend. The challenge for policymakers in 2012 is to convince them that it makes business sense to do so.”