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CFOs are cautiously optimistic  

Jose Carvalho

New research from American Express and Institutional Investor has found that after years of economic upheaval, the UK’s CFOs are optimistic about national business performance in 2018 – but mitigating future risks remains high on their agendas. Article by Jose Carvalho, Executive VP – American Express Global Commercial Services.

This year’s Global Business and Spending Outlook – which surveyed 100 senior finance executives in the UK, half of whom work for companies with more than US$5 billion in annual revenue – revealed that UK CFOs are amongst the most confident in Europe. 91 percent anticipate domestic economic expansion this year (with 38 percent expecting substantial growth), compared to 79 percent across Europe and 85 percent globally. This is significantly higher than last year’s survey, in which only 33 percent of UK CFOs anticipated substantial or modest economic growth in the country.  In this year’s study, 74 percent reported increased revenues over the last twelve months, versus 54 percent globally. UK CFO confidence is further evidenced by an average planned increase in spending and investment of 8.6 percent in their businesses over the course of the year.

However, while confidence has increased, UK CFOs remain watchful – with 83 percent saying that the prospect of widely unanticipated economic or political events negatively affecting their business is a rapidly growing concern. The research also indicated that uncertainty outside the UK is more of a worry than risk from within it, though over half of respondents (53 percent) say they are unlikely to withdraw from high-risk geographies in response to political or economic risk.

To combat uncertainty, CFOs are taking careful steps to manage and mitigate risks. The majority (63 percent) of those surveyed said that they are focused on moderate and controlled spending rather than aggressive investment. CFOs will also increase time and resources directed toward enterprise-level risk management systems (59 percent) and managing risks such as economic or political uncertainty through insurance and hedging tactics (65 percent).

The UK’s CFOs also cited “better meeting customer needs” as the most important priority for their businesses. In line with this goal, investment priorities remain broadly similar to last year, but with a slightly increased focus on developing new products and services. 37 percent of UK CFOs also plan to invest more in sales and marketing activities compared to last year.

On the matter of cyber-security, CFOs are confident about their ability to protect customer data, but remain vigilant; 88 percent will continue to invest more time, attention and money on protecting customers’, suppliers’ and employees’ data in the next two years. In the current climate, it is not surprising that protection against data breaches is the single most important IT-spending priority over the coming year.

Positivity around growth is also expected to have a knock-on effect on hiring and headcount. Headcount is expected to increase in 2018, with 51 percent of UK CFOs anticipating at least an 8 percent rise.  In line with the rest of Europe, increasing wages is the most popular way for CFOs to attract and retain staff.

Commenting on the research, Jose Carvalho, Executive VP, American Express Global Commercial Services commented, “While there’s no denying that we have a long way to go until the political and economic concerns of the UK’s business leaders are pacified, it is hugely encouraging to see leading CFOs’ focusing on shifting back to operational norms. In particular, a focus on how they can better serve their customers suggests that, after weathering a lengthy economic storm, CFOs have returned to thinking about long-term success. This can only be good news for the future of UK business.’’

Jose continued, “Our study shows that CFOs rightly recognise that technology has a big role to play in helping their businesses stay ahead – with almost three-quarters (74 percent) saying they have already invested in AI. To remain competitive on the world stage, it will be important for CFOs in the UK to continue to balance investment in innovation against the costs associated with mitigating risk.’’

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