European CFOs: 42% chance of a Brexit, with possible spillover effects to other EU countries

June 16, 2016

European CFOs remain moderately optimistic about the economic forecasts and the own company. In spite of the expected growth in employment, political uncertainty causes restraint in company expenditure. According to the financial directors, Great Britain's possible exit from the EU will have negative effects. These are a few results from CFO Survey Europe, globally the longest running quarterly survey among CFOs, carried out by TIAS School for Business and Society (Tilburg) and Duke University (North Carolina, US).

In spite of the somber economic confidence, companies expect employment to improve. 
There is still a feeling of moderate optimism amongst the Economic financial directors concerning the economic forecasts. In the second quarter of 2016, the number of optimistic CFOs (33%) had indeed increased with respect to the previous quarter (18%), however the average level of optimism stagnated at 55 (measured on a scale of 100). Also, financial confidence in the own company continues the trend set last year with just a third of the financial directors being more optimistic about the coming twelve months.

Although economic uncertainty still predominates, companies intend to step up productivity in the coming year with an average of 11%. They also anticipate recovery in employment. For instance, in contrast with the previous quarter's 0% growth, the coming twelve months show an increase of 6% calculated on the number of permanent contracts. The European CFOs also point to a significant improvement in temporary contracts, whereby the fall seen in the first quarter is now turning into an average growth of 3%. With an expected growth of no less than 11%, outsourcing of work could well provide the biggest positive surprise in the coming twelve months. 

Political uncertainty causes restraint.
The chance of a Brexit should not be underestimated. The somber optimism amongst the financial directors can be primarily attributed to the current political climate. For instance, companies are not only concerned about public policy and regulations, but for instance they also have little faith in the current (deficient) functioning of government. So at the moment, such political uncertainty ensures that more than 60% of companies show more restraint in their company expenditure and more than a third are reconsidering acquisition plans. 

The biggest factor that is now causing uncertainty, comes of course from Great Britain, where the future of the country will shortly be decided upon by means of a referendum. The chance of Great Britain leaving the EU is estimated at an average of 42%, with more than 40% of European CFOs even estimating the chance to be 50% or more. 'Should Great Britain really give up its membership, then that will create a precedent that could well lead to similar referendums in other EU Member States. This will seriously test the unity and survival of the European project', says Kees Koedijk, director and dean of TIAS. More than three quarters of the European CFOs agree.
In spite of the real possibility of a Brexit, a large majority of the directors (78%) say that retaining membership of the EU is not only of paramount interest for enterprises in Great Britain itself, but in particular for the rest of the European Union as well. For instance, 26% of those queried say that an actual Brexit will have negative consequences for the financial performance of their company.

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Here you can read the complete dossier about the CFO Survey

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