UK CFOs set to cut hiring and slash investment following Budget
Finance chiefs at UK businesses are focused on cutting costs in the wake of the Budget, with investment and hiring set to suffer as a result.
Over half (52 per cent) of CFOs surveyed by Deloitte said cost reduction was a strong priority for their business in the wake of the Chancellor’s tax raid.
The survey showed that hiring intentions in the final quarter of last year fell at the fastest pace since early 2020, while a net 58 per cent of firms expect to cut discretionary spending.
In addition, less than one in five CFOs (18 per cent) said it was a good time to take additional risk onto their balance sheet, the weakest risk appetite in over a year.
“With cost control to the fore in the wake of the Budget, CFOs have trimmed expectations for corporate investment, discretionary spending and hiring in the next 12 months,” Ian Stewart, chief economist at Deloitte said.
The survey is another indication that the measures announced in the government’s first Budget have knocked business confidence and weighed on economic activity.
Rachel Reeves hiked employers’ national insurance in October’s fiscal event while also lifting the minimum wage by 6.7 per cent, imposing significant extra costs on many UK firms.
These measures have added headwinds to an economy that was already losing momentum in the second half of 2024.
Official figures show that the UK unexpectedly contracted in October for the second straight month while the Bank of England’s latest projections indicate that the economy was stagnant in the final quarter of 2024.
Despite the impact of the Budget, Stewart predicted that the economy would grow faster this year than last on the back of “easy fiscal policy” and lower interest rates.
Deloitte’s survey shows that UK CFOs expect to see three interest rate reductions in 2025, one more than currently priced in by financial markets.
This is partly due to lower wage growth, with the survey suggesting that wage growth will ease to 3.2 per cent in the next year, down from four per cent in the previous report.