With cost control to the fore in the wake of the Budget, CFOs have trimmed expectations for corporate investment, discretionary spending and hiring in the next 12 months. But despite a fall in business confidence, we expect to see UK growth picking up over the summer on the back of easy fiscal policy and interest rate reductions, with GDP growth likely to exceed the 2024 outturn and the performance of the euro area.
A net 26% of CFOs reported feeling more pessimistic about the prospects of their business than three months ago, marking the first time sentiment has tipped into negative territory since the second quarter of 2023. Nonetheless, confidence is well above the lows seen in 2020 and 2022.
CFOs are entering 2025 with a sharp focus on cutting costs. When asked how they plan to respond to the forthcoming rise in National Insurance Contributions (NICs), CFOs chose cutting costs as their top strategy. Raising productivity and prices for customers were rated as lesser, but important, strategies for dealing with the increase.
Finance leaders rate cost reduction as the top priority (52% rating it as a strong priority) for their business for the 11th consecutive quarter. They see this as part of a broader corporate sector squeeze on spending, with a net 58% expecting UK corporates to cut discretionary spending, and a net -64% expecting increases in hiring, which is a four year low.
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