CFO confidence

CFO confidence in numbers

Chief Financial Officers (CFOs) in the UK are cautiously optimistic about an end to the recession, according to the latest Baker Tilly Finance Director Survey, but there remain major concerns over costs, cash flow and trading conditions

Growth

expected a return to quarterly GDP growth of 1% or more by the end of 2010

However, the majority expected a return to growth to be delayed until the last quarter of 2010, with a sizeable minority of 11%, not expecting sustainable recovery until 2011 or later. The findings echo the latest CBI report, which states: “2010 should start with very weak growth of only 0.1% in Q1 2010, and 0.3% in Q2.”

Investment and divestment

Some 20% of companies surveyed were looking to cut costs by exiting non-core activities either by simply withdrawing from the market or looking for a buyer for part of the business. Meanwhile, 29% indicated that their strategy in the next 12 months would include looking at acquisitions.

Performance

expected no improvement in trading conditions for their business over the next 12 months

Asked about trading conditions in their industry sector as a whole, 40% of respondents expected trading conditions to worsen over the next 12 months, while 35% of CFOs cited lack of consumer or buyer confidence as the most significant issue. Access to credit was a problem but this was down to 29% from 35% who cited it as an issue six months ago. Just over half (51%) of respondents expected lower like for like sales than in the same months in the previous year. More positively, 33% of those surveyed expected an increase in like for like sales, albeit against a weak comparative period. Only 34% of businesses expected to benefit from increased overseas sales in 2009 compared with last year.

Cash flow

of respondents reported a problem with delayed collections from customers

This is a significant increase on the 19% who reported this as an issue in the March survey, indicating that firms are funding working capital by stretching credit terms with suppliers. Availability of credit and access to credit insurance continue to be concerns. Perhaps as a result of continuing difficulties in accessing credit, 31% of those surveyed felt that their banks were unsupportive although very few had changed or intended to change banks, possibly because they are not in a position to do so.

Government response

Of those surveyed, 28% felt that government action in responding to the needs of business had been good or better, while 33% thought that it had been mixed and 39% characterised it as poor.

Managing costs

expected to make further cost reductions over the next 12 months

Employees appear likely to bear the brunt of this burden. More than 60% of CFOs were considering some form of restructuring, with a similar number looking to cut recruitment and 43% expecting to make redundancies over the next 12 months. The planned reductions are in addition to jobs lost during the past six months. Renegotiating lease and tenancy agreements with landlords (18%) and supplier trade terms (41%) were also seen as cost-saving measures.

Risk and governance

The majority (57%) of CFOs surveyed believed that the risk to their businesses from fraud had increased as a result of the recession. Many companies (45%) had consciously made improvements to their risk management processes in response to this increased risk. A significant minority (13%) of businesses had also tightened controls over IT systems and physical security over assets.