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UK firms' risk appetite picks up even as election looms - Deloitte

Published 29/09/2014, 00:08
UK firms' risk appetite picks up even as election looms - Deloitte

LONDON (Reuters) - British companies are feeling their most confident about taking on business risk in seven years despite worries about an election in 2015 and a possible referendum on Britain's membership of the European Union, a survey showed on Monday.

In a change of mood likely to be welcomed by the Bank of England, 72 percent of chief financial officers said now was a good time to take risk onto their balance sheets, according to the quarterly survey by accountants Deloitte.

That was up from 65 percent in the previous survey conducted in the second quarter.

"With a resurgent U.S. economy, good growth in the UK and plentiful liquidity, CFOs have shrugged off the effects of rising uncertainty and weakness in Europe," said Ian Stewart, chief economist at Deloitte.

"But it's not all plain sailing for the corporate sector."

Perceptions of economic and financial uncertainty rose for the first time in two years, in large part due to Scotland's independence referendum on Sept. 18 which threatened to break up the United Kingdom but eventually resulted in a 'no' vote.

The survey was conducted from Sept. 8 to 22.

The CFOs ranked the 2015 election and a future UK referendum on EU membership ahead of deflation, weakness in the euro zone and higher interest rates as risks to their businesses.

"Political risk has eclipsed worries about the economy as concerns for CFOs," Stewart said.

Britain's opposition Labour Party, which has a narrow lead in opinion polls, has promised tough action on power companies, banks and other sectors to help consumers. The Conservative Party has also raised concerns among big business by promising to hold a referendum on leaving the EU if it is re-elected.

Manufacturing lobby group EEF said on Monday that a survey of its own, of 160 companies in August, showed that 85 percent of manufacturers favoured staying in the EU while 7 percent would vote to leave.

The investment plans of Britain's biggest companies are key to the hopes of the Bank of England and the government that the economic recovery can move onto a more sustainable footing

Deloitte's survey was based on responses from 118 CFOs.

A third survey published on Monday showed private sector growth in Britain performed a bit less strongly in the three months to September and companies' expectations of a pick-up in the fourth quarter were also less emphatic.

Employers group CBI said its Growth Indicator slowed to +23 in September from +35 in May due to slower growth in the retail and motor trades sectors. But the balance remained well above its long-run average, the CBI said.

The BoE expects a slowdown in the pace of Britain's economic recovery in the second half of 2014, one of the reasons why it has been holding off from raising record low interest rates.

(Writing by William Schomberg; Editing by Hugh Lawson)

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