Optimism CFOs back to record levels
In the second quarter, the economic sentiment among European CFOs has improved significantly compared with the first quarter. Yet a number of European companies are struggling with above-average uncertainty surrounding public policy and the economic situation. That is shown by the CFO Survey Europe.
The second quarter of 2017 shows an impressive improvement in the number of CFOs who are in a positive mood about the economic prospects. In comparison with the previous quarter, the number of optimists has increased from 42% to 62%, thus equaling the record levels of 2014 and 2015. The number of pessimists also fell significantly, from 20% in the previous quarter to just 9% in this one. The level of optimism has risen to 61 points, on a scale of 100.
Yet in this second quarter too, uncertainty is still the greatest concern for more than one third of the CFOs. Thirty nine percent of them say they suffer from above-average uncertainty surrounding public policy and economic conditions. As a result, more than one in four companies are postponing new projects and expansion plans. In 6% of the cases, these are even being canceled altogether. On the other hand, a quarter of the companies are opting to increase activities.
“We have asked companies which best practices they fall back on in times of above-average uncertainty,” says Kees Koedijk, dean and director of TIAS School for Business and Society. “Most companies say that they put confidence in the most common methods, such as improving the liquidity position and cost reductions, increasing employee flexibility and strengthening risk management. However, surprisingly enough a large proportion of CFOs also indicate innovation and the development of new markets as best practice. Maybe this explains the increase in the company expenditure that we can expect for the coming twelve months. For instance, the CFOs predict an average growth of 8.2% in capital investments, 7% growth in both technology and R&D and some 4% growth in marketing expenditure. Uncertainty therefore does not by definition lead to a general aversion to risk.”
For more results, read the CFO Survey Europe report.
The CFO Survey Europe is globally the longest running quarterly survey among CFOs. It is carried out by TIAS School for Business and Society (the Netherlands) and Duke University (US).