Deloitte’s latest survey of UK Chief Financial Officers, released overnight, shines light on the plans of Britain’s largest corporates. The full report is available at:

The labour shortages and supply disruptions British businesses are experiencing are likely to persist for a year, with no meaningful easing until late 2022 or 2023, according to CFOs of the UK’s largest companies. CFOs are particularly concerned about labour supply, with three-quarters reporting that their businesses have experienced some, significant or severe recruitment difficulties in the three months preceding the survey. They expect only limited improvement in the situation in a year’s time.

CFOs rate labour shortages, the pandemic and inflation as the top risks facing their businesses. Amid growing wage and price pressures, CFO expectations for a rise in operating costs have hit a record high, with a majority of respondents also expecting a margin squeeze over the next 12 months. CFOs expect inflation to run higher for longer, with a narrow majority expecting it to exceed 2.5% in two years’ time, well above the Bank of England’s 2.0% target rate.

Despite labour and supply disruptions, introducing new products or services and expanding into new markets is the top corporate priority. CFOs are placing more emphasis on raising capital expenditure now than at any time in the history of the survey. Excess demand, low interest rates, organisational change and the energy transition mean that this remains, for now, an attractive time to be investing.

With the climate transition an increasingly prominent factor in corporate decision making, this quarter’s survey includes new questions on how climate policy is affecting business strategies. CFOs believe the climate transition will reshape the business environment with more than two-thirds expecting significant or wholesale change in their own business over the next ten years as a result of the move to net zero.

Amid growing short-term threats, CFOs rate climate change as one of the main risks facing their business now, almost on par with labour shortages, the pandemic and inflation, which top the risk list. Strikingly, three current challenges - supply chain disruptions, the risk of higher interest rates and Brexit - rank below climate on the list of threats.

The reduction of carbon emissions is a public good of the first order. But CFOs also see it as a business imperative, one which increasingly matters for firm revenues, financing and employees. Customers emerge as the main driver of corporate action on climate followed closely by public opinion, investors, employees and government policy. The breadth of this coalition speaks to a growing societal consensus around the urgency of action. CFOs rank building reputation and brand and attracting talent as the two principal benefits of action, underscoring how climate is emerging as a core business issue.

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