Risk appetite spikes in 2011

Julian Harris
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RISK appetite at FTSE companies has hit its highest rate since a leading survey of chief financial officers began in 2007, it was revealed today.

Four in ten (41 per cent) CFOs think this is a good time to take on greater risk on their firms’ balance sheets, according to a Deloitte survey – up from 32 per cent at the end of 2010, and just 25 per cent last autumn.

However, CFOs remain downbeat about the UK’s economic prospects, with two thirds saying there’s a less than 50 per cent chance of inflation falling back to the Bank of England’s two per cent target.

Only seven per cent of CFOs think there is a “very good chance” of inflation falling back down, as the Bank expects.

While still optimistic about their companies’ prospects, CFOs are less confident than last year. Deloitte’s optimism balance fell to its lowest reading since the first quarter of 2009.

“While corporate profits have rebounded strongly from their lows, high inflation and the prospect of higher interest rates may limit the scope for margin growth from here,” said Deloitte’s chief economist, Ian Stewart.

Nonetheless, CFOs showed an appetite for adding leverage, raising gearing and there was a further increase in the proportion reporting a proposed hike in capital expenditure over the next 12 months.

Analysts hope that a boost in capital expenditure could help offset weak consumer spending in the UK.