I hope you might be able to join me later today for a webinar in which I will examine the results of our latest CFO Survey and prospects for the UK outside the European Union. The webinar takes place today, Monday 18th July, at 1500 BST. To join, please logon to:
If you cannot make it today the webinar will be available on a listen again basis via the same link.
The second quarter Deloitte survey of UK Chief Financial Officers, released this morning, provides a powerful guide to the thinking of major businesses in the wake of the UK's vote to leave the EU. The survey took place between June 28th and July 8th against a backdrop of elevated political and economic uncertainty. To download the report please visit:
CFOs' perceptions of uncertainty have soared in the wake of the vote to levels last associated with the euro crisis five years ago. Uncertainty has had a toxic effect on business sentiment with optimism dropping to the lowest level since the survey started in 2007, lower, even, than in the wake of the failure of Lehman in late 2008. Corporate willingness to take risk has also declined sharply. Just 8% of CFOs say now is a good time to take risk onto their balance sheet, down from 25% in the first quarter and 59% a year ago.
CFOs believe that the UK's exit from the EU will have a significant dampening effect on their own spending plans in the next three years. 58% expect capital spending to be somewhat or significantly lower; 66% expect hiring to be lower and 74% see discretionary spending being lower over this period.
Large companies do not seem to be waiting for growth to slow before adjusting direction. CFOs have shifted to markedly more defensive balance sheet strategies in the wake of the referendum. The top priorities are increasing cash flow and cutting costs. Conversely CFOs are placing less weight on introducing new products or services and investment.
Expectations for growth in capital spending, hiring and discretionary spending are at levels that were last seen just before the so-called "double dip" slowdown of 2012. Our long-running series on expected M&A activity has registered its largest ever fall. This same caution has fed through to a decline in expected demand for bank credit and in equity and bond issuance. Since the referendum the Bank of England has eased bank capital requirements to help bolster the supply of credit; the CFO Survey suggests that a further risk is a lack of appetite for credit from the UK's largest companies.
When asked what the authorities can do to support economic activity an overwhelming majority - 91% of CFOs - said that giving a clear signal about the government's aims in the negotiations with the EU should be a strong priority. Yet CFOs are sceptical that the UK will be able to preserve all the advantages of the UK's current situation outside the EU. In a finding which underscores the pressure on the UK government 68% of CFOs believe that leaving the EU will lead to a long-term deterioration in the UK business environment.
The second policy aim for the government, according to CFOs, should be maintaining the solvency and liquidity of the banking system, with 88% rating this as a strong priority. The government's budget deficit reduction plan was ranked third, with 25% saying it should be a strong priority. Enthusiasm for cutting interest rates, restarting Quantitative Easing or cutting taxes was muted – in each case fewer than 10% of CFOs rated these strategies as strong priorities.
The CFO Survey shows that the referendum vote has triggered a strong, negative reaction from the UK corporate sector. CFOs have reacted by focusing on reducing costs and building up cash flow and have become more cautious about all forms of spending. Even more challenging in the long term is the perception that leaving the EU will lead to a deterioration in the UK business environment.
There's no doubt, these are weak results. And yet there are caveats.
The two remaining candidates for the leadership of the Conservative Party agree that the UK will leave the EU. The difference at this stage is one of timing. Frontrunner Theresa May sees no need to start the formal process of leaving immediately by triggering Article 50. Andrea Leadsom says she would invoke Article 50 immediately if she became Prime Minister.
The decision facing UK voters in the polling booths on 23rd June was deceptively simple – to remain in or to leave the EU.
Now comes the hard part. It falls to politicians to interpret the vote and turn it into some sort of reality.
That reality could yet leave the UK as a member of the EU. Yesterday former Prime Minister Tony Blair said that the UK "should keep our options open" on leaving the EU and suggested that as the implications of Brexit emerge the "will of the people" may shift.
Pretty much everyone agrees that the UK's referendum has put us into a world of uncertainty and elevated risk. For once the use of the term "Earthquake" in the headlines was not hyperbole.
Saying that things are "uncertain" is obvious but not very helpful. Quite naturally theories, speculation and forecasts multiply.
Voting in this Thursday's UK referendum on membership of the EU takes place between 7am and 10pm. Unlike last year's General Election there will be no official exit polls, partly because of the difficulty of extrapolating from a sample to a wider population in a referendum. Nonetheless, the Financial Times reports that some hedge funds have commissioned their own exit polls in order to trade on early indications of the result. The movement in the value of sterling during the count of votes from 10pm on Thursday evening will provide one signal of market sentiment about the outcome.
The argument runs that for all the ups and downs of the stock market equities outperform other assets, such as cash or government bonds, in the long term.
One longstanding aim of the European project is to foster economic convergence and to improve economic performance in low income economies. At its simplest convergence enables poorer countries to catch up with richer ones, helped by improved cross border trade, capital flows and population movements.
Western policy makers have been grappling with the global economic crisis and its legacy for eight years. Slow growth, deflation and austerity risk becoming the 'new normal' for many countries. Faced with such pressing threats it is no surprise that profound, long-term shifts in the economy and in society are getting less attention.
Demographic change is one such issue.
Last week's opinion polls and bookmakers' odds show a much diminished likelihood of a UK exit from the European Union.
The average of the last six opinion polls show that, excluding Don't Knows, Remain is on 55% and Leave on 45%. That is the biggest lead for Remain in three months. The bookmakers' odds have moved even further. At the end of last week they were pricing in just a 22% chance of Brexit, the lowest reading in a year.
We start this week's Briefing with a question. In which region or country – the US, Japan, euro area or the UK – have expectations for GDP growth remained most robust over the last year? A clue: it saw the fastest GDP growth in the first quarter of this year.
The answer is the euro area. The outlook for the US, Japanese and UK economies has deteriorated markedly in the last year while euro area growth expectations have seen only modest downgrades.
Forecasting is, as we observed in last week's briefing, a perilous business. To stand a chance of being right about the future you need to understand where you are now.
So it makes sense to pay attention to what the latest data and news are saying. Certainly economists and journalists pore over every new piece of data looking for signs of where the economy is heading.