CFOs report the highest cost of credit in over a decade

17-Oct-2022

- CFOs of the largest UK corporates rate credit as being more costly than at any time since 2010

- CFOs have become markedly more pessimistic about financing costs since the mini-Budget

- The majority of CFOs expect revenues to fall over the next 12 months..

- CFOs have tilted to defensive strategies with cost reduction and cash control their top two priorities

- On average, CFOs attach a 78% probability to the UK falling into recession in the next 12 months

CFOs view credit as being more costly than at any time since 2010, according to Deloitte’s UK CFO Survey, Q3 2022. Over half (56%) rate credit as costly while over a third of finance leaders (39%) note that new credit is not easily available.

The financial market impact of the government’s mini-Budget on 23 September, which took place roughly halfway through the survey period, has added to the pressures. Those CFOs who responded after the mini-Budget foresaw materially higher interest rates and were more likely to report elevated credit costs than those who responded before.

Tightening credit conditions have resulted in a sharp fall in the attractiveness of debt finance to CFOs - whether bank borrowing or bond issuance - over this year. CFOs now see equity as a more attractive source of finance than corporate bonds, an assessment last seen during the credit crunch in 2009.

On average, CFOs* believe inflation will moderate from its current level to 6.2% in a year’s time but expect inflation to stand at 3.8% in two-years' time, almost double the Bank of England's 2% target.

Finance leaders expect the Bank of England to continue tightening monetary policy but at a significantly less aggressive pace than markets suggest. CFOs see the Bank's base rate at 3.75% in a year's time, well below market expectations.

On average, CFOs attach a 78% probability to the UK falling into recession in the next 12 months.

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