Britain’s leading corporations believe a break-up of the euro poses the biggest risk to their businesses over the next year, according to a survey.
A Greek exit or worse, the collapse of the currency union, will hit exports and business confidence, according to finance directors surveyed by the accountancy firm Deloitte. Firms are unconvinced by the response of European politicians and policymakers to the crisis and fear the knock-on effects will push the U.K. into a deeper recession, said Deloitte.
On average, finance directors see a 37% probability that one or more member states will leave the single currency in the course of 2012. Uncertainty is also a factor forcing companies to cut jobs and conserve cash. The survey found that the proportion of finance chiefs who rate the level of external financial and macroeconomic uncertainty facing their business as being “high” or “very high” has more than doubled in the last six months to 56%, up from 26% in the summer.
Deloitte said the mood was summed up in the comment of one finance director who said: “Everyone is waiting for something very bad to happen.” Ian Stewart, Deloitte’s chief economist, said: “The results illustrate the corrosive effect of uncertainty on corporate spending: 87% of finance directors believe this is a bad time to be taking additional risk on to their balance sheet. Just as it happened in late 2008, finance directors are reacting to a tough climate by strengthening their balance sheets.” A report by the employment agency Reed found that job vacancies declined in December after rises in October and November. The month-on-month figures in the Reed job index were down 9% in December compared with the previous month after big falls in vacancies for public-sector jobs and the financial sector. Only the hospitality sector and purchasing jobs bucked the trend, said Reed.
The index remains 20% higher than a year ago, but is likely to be seen as an indication that companies are battening down the hatches before a contraction in the U.K. economy this year. Deloitte said finance directors are working on the assumption that Britain will fall back into recession.
“They see a 54% chance of the U.K. suffering a ‘double dip’, up from just 27% a year ago,” said Stewart. “The majority of respondents (64%) expect a prolonged period of weakness lasting more than a year. Moreover, financial stress is affecting big U.K. corporates, with CFOs [chief financial officers] reporting the sharpest decline in credit availability since the third quarter of 2008.”
Copyright: Guardian News & Media 2012
