The extent of business nervousness surrounding the General Election was laid bare today by a survey of finance chiefs of some of the UK’s largest companies after sterling yesterday stooped to a five-year low against the dollar.
Chief financial officers are much less inclined to take risks – 51 per cent said now was a good time to take risk onto their balance sheets, compared with 72 per cent six months ago, according to survey data released by financial services firm Deloitte today.
“Rising perceptions of uncertainty have dampened corporate risk appetite,” said Deloitte chief economist Ian Stewart. “This provides an ominous reminder that the business recovery is not assured.”
The pound fell as much as 0.5 per cent to $1.4567 yesterday, the lowest since June 2010. Election jitters aside, sterling has also been weighed down by low inflation which has dampened expectations of an interest rate hike. Some economists believe inflation will drop into negative territory when data are released today, while most think interest rates will not rise until 2016.
Deloitte’s survey revealed that post-election uncertainty, policy change and a referendum on EU membership rank as the biggest threats to business.
Levels of uncertainty are such that 63 per cent of finance chiefs said the level of uncertainty facing their business was high or very high – the highest percentage for two years.
Firms are responding by prioritising defensive strategies – increasing cash flow and reducing costs – over expansionary strategies like introducing new products or services and taking over other firms.
“Whoever is in government after 7 May cannot take the business-led recovery for granted. There is a pressing need to provide business with certainty and stability in the coming years,” said Deloitte chief executive David Sproul. “The UK’s recovery has been led by corporate hiring and investment. This Survey provides a reminder that business-hostile policy change remains a potent threat to that recovery.”
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