UK finance leaders express concerns that the nation is trailing its global competitors as rising costs continue to pressure profit margins, according to a recent survey. The findings also highlight growing scepticism towards Labour’s growth initiatives. The government has been actively engaging with leading investment figures, including JP Morgan’s Jamie Dimon and Goldman Sachs’ David Solomon, in efforts to bolster support for the UK.
However, a prominent survey of top finance executives indicates waning optimism in the UK, alongside data suggesting a downturn in economic output. Research conducted by Deloitte in September reveals that 84% of chief financial officers (CFOs) anticipate an increase in operating costs, prompting business leaders to focus on managing cash flows.
The survey, which included 68 executives, 11 of whom are from FTSE 100 companies, shows that nearly half (47%) of firms expect a decline in operating margins, marking the highest level since the second quarter of 2023. Additionally, plans for expansion have largely been postponed. Only a quarter of respondents plan to introduce new products or services, one-eighth intend to invest in new capital, and 11% are considering acquisitions.
Inflation expectations are projected to remain steady at 3.2% over the next year, while wage growth has averaged around 3.5% over the past year. Ian Stewart, chief economist at Deloitte UK, notes that finance chiefs are increasingly concerned about the UK’s competitiveness rather than external factors such as the war in Ukraine. “CFOs have responded by strengthening balance sheets through a focus on cost control, building cash reserves, and reducing debt,” Stewart stated.
Labour’s economic policies have also come under scrutiny, with Deloitte’s survey not being the only source of concern for Shadow Chancellor Rachel Reeves. Consultancy BDO reports a decline in business output below long-term trends, with the services sector experiencing its largest month-on-month drop since September 2022. Respondents attribute this to higher taxes on hiring, particularly the increase in employers’ national insurance contributions (NICs) introduced by Labour, which has dampened employment prospects.
Employment levels have reached a 13-month low, with fewer firms planning to hire in the coming year. BDO’s survey presents a challenge for the Treasury, especially given the more positive data from August. “The uptick we saw in August was a false dawn,” said Scott Knight, head of growth at BDO. “While there is a kernel of hope amongst the mid-market, it is fragile, and they need clarity from the top before they can take any meaningful investment risks.”
