Insight & Analysis

UK CFOs cautious on fears of growing political and economic uncertainty

London city surrounded in fog

Finance executives are battening down the hatches on worries about the outlook for their firms.

Most top UK chief financial officers fear an increasingly volatile environment for their businesses over the year ahead and as a result are exercising caution over investment, according to new research.

The survey of 100 CFOs by American Express says finance executives are concerned about growing political turmoil as well as economic uncertainty. Nearly 90% of respondents believe that the prospect of “widely unanticipated surprise events” is a rapidly growing concern for their company.

As a result, 63% of senior finance executives report that their companies are more cautious about increasing spending and investment in the UK, and 77% are more cautious about investing abroad. Levels of caution are higher than readings the previous year on both fronts, says American Express.

The survey, Global Business and Spending Outlook 2019, carried out in collaboration with Institutional Investor, also found that 76% of CFOs plan to increase time, attention and resources directed towards enterprise-level risk management systems and process improvements and protecting the company’s physical assets.

Almost two-thirds (62%) report that, as a direct response to economic or political uncertainty, their companies are likely to withdraw business activities from high risk geographic areas and focus on lower risk areas over the next year.

On a brighter note, and despite the prevailing uncertainty 68% of CFOs report increased revenue growth over the previous 12 months.

Customer is king

Commenting on the research, Carlos Carriedo, Senior Vice President at American Express Global Commercial Services Europe, said: “The UK’s businesses continue to operate in a challenging climate but our research shows they are clear-sighted and determined in their strategies for growth and managing risk. Their resilience in the face of adversity, and positive reported revenue growth, is encouraging to see.”

The research also highlighted other strategies that CFOs plan to implement to achieve success in 2019.

Meeting customer needs remains the number one priority over the coming year, with 79% of UK CFOs ranking this top of the list. The biggest shift in priorities concerns pursuing business transformation and innovation. More than half (55%) of executives say this has become an important goal, compared to only 38% last year.

Furthermore, over three quarters (77%) of executives say that their companies have explicit strategies to appeal to Gen Z employees, with the same proportion having explicit strategies to appeal to Gen Z consumers.

Carriedo continued: “Our study shows CFOs are placing growing importance on better meeting the needs of their customers – a priority that is informing their business strategies for the year ahead. In the midst of economic and political change, UK organisations believe customer retention is integral to their survival. To continue to prosper, they are balancing risk mitigation with making the investments required to meet the evolving needs of their customers.”

Over 50% of respondents to the 2019 Global Business and Spending Outlook survey represent companies reporting revenues of US$1 bn or more. All survey responses were gathered in late November and December 2018.

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