TIAS

European CFOs: Political uncertainty at home and abroad affects operations

September 27, 2016

Domestic political uncertainty puts business expenditure and employment under pressure. For instance, 60% of European companies have become more cautious. The struggle between Trump and Clinton also creates extra uncertainty for the investment plans of European companies. Nearly one in four CFOs think that the United Kingdom will not finally leave the EU. These are a few business results from CFO Survey Europe, globally the longest running quarterly survey among CFOs, carried out by TIAS School for Business and Society (Tilburg, NL) and Duke University (North Carolina, US). 

The economic sentiment among European financial directors is keeping in line with the previous quarter. For example, 28% of CFOs are optimistic about the economic prospects and this gives an average level of optimism of 56.3 in the third quarter (measured on a scale of 100). A similar development can also be seen in the United States, where economic optimism among financial directors is gradually recovering. At the moment, more than a quarter of American financial top managers is more optimistic, with an average level of optimism of 60.6 on a scale of 100. 

Possible postponement of investments by European companies if Trump is elected president
More than three quarters of European companies say that they have not (yet) postponed their investment plans due to the American presidential elections and their unpredictable outcome. Nine out of ten of these companies indicate that they will maintain their current level of investment if Hillary Clinton is elected president. Another 5.5% will probably even accelerate the implementation of investments and restart previously postponed plans. However, a completely different story emerges if Donald Trump is elected president. In that case, only 56% of these companies will continue their present level of investments. In fact, more than 40% indicate that they will even postpone these plans until more clarity is created surrounding the concrete effects and impact of his intended political and economic policies. 

European CFOs seem to be indicating that they consider Clinton to be the more stable candidate. Their American colleagues take a different stance. A quarter of them will postpone investments regardless of which candidate is chosen until future government policy has further developed. If Trump is elected, then some 11% say that they will want to increase investments further, while that applies for just 4% of the companies if Clinton is elected president. 

"We see here a clear contrast between European CFOs, who appear to see more in Clinton's economic and political agenda, and American CFOs who perhaps consider that business interests are better served by Trump's policy plans. Maybe Trump's continued and often controversial rhetoric, in which he places US interests above those of all others, contributes to the European image of a relatively more moderate and predictable Clinton." According to Kees Koefijk, dean and director of TIAS Business School.

Brexit not yet an established fact, but already there is talk of a Dexit, Nexit, Hexit and Grexit (again)
More than 30% of European CFOs indicate that a tempered Brexit procedure would be better for their company, while nearly 20% think they will be better off with an accelerated procedure. As a consequence of the Brexit, 27% of European CFOs say that their company will shift production and operational activities to other countries in Europe.

Some 30% think that the Brexit procedure will be completed towards the end of 2019. Nearly a quarter think that this will only be the case at the end of December 2020 and another 22% think that even 2020 will not be attainable. And yet nearly a quarter of European CFOs think that the UK will not eventually leave the EU. 
The chance that one of the other EU Member States will leave the EU within the coming two years is estimated to average 19%. One in four CFOs think that Denmark will leave while 21% of the CFOs also see the Netherlands and Hungary as potential leavers and one in five think that Greece will eventually leave the EU.

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