Deloitte says debt now less attractive form of future finance for businesses
(Picture: Getty Images)The UK will dive into recession within the next year according to four out of five financial heads at the world’s leading businesses.
An economic crash was predicted by 78% of senior executives surveyed for audit giant Deloitte’s third quarter UK chief financial officer (CFO) survey.
Gaining credit will also be more costly that any time since 2010, according to finance chiefs with more than half (56%) of finance heads rating 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 September 23, which took place roughly halfway through the survey period, has added to the pressures, according to Deloitte.
CFOs who responded to the survey after the mini-budget foresaw materially higher interest rates and were more likely to report elevated credit costs than those who responded before.
Ian Stewart, chief economist at Deloitte, said: “A twelve-year period of easy credit conditions is drawing to an end.
“Corporates are seeing a reset in the cost and availability of credit. Not since the credit crunch have CFOs rated debt – whether that’s bank borrowing or corporate bonds - as being less attractive as a source of finance for their businesses than they do today.”
CFOs now see equity as a more attractive source of finance than corporate bonds, an assessment unnervingly last seen during the credit crunch of 2009.
On average, CFOs believe inflation will moderate from its current level to 6.2% in a year’s time but expect inflation to drop back to 3.8% in two-years’ time, almost double the Bank of England (BoE) 2% target.
Finance leaders expect the BoE to continue tightening monetary policy but at a significantly less aggressive pace than markets suggest and stated that the Bank’s base rate at 3.75% in a year’s time, well below market expectations.
The latest Deloitte CFO Survey took place between September 20 and October 3 this year. 87 CFOs participated, including the CFOs of 23 FTSE 100 and 30 FTSE 250 companies.
