Big UK firms 'delaying deals ahead of EU vote'

Survey of CFOs also shows most don't want Brexit, and are not hiring for now

LONDON • Big British firms are delaying deals and hiring decisions ahead of a referendum on the country's European Union membership, a survey showed yesterday, adding to signs that uncertainty around the vote is weighing on the economy.

Chief financial officers or CFOs are increasingly in favour of staying in the EU, according to the survey published by accountancy firm Deloitte.

Seventy-five per cent of the 120 CFOs polled said it would be favourable for Britain to remain in the EU, up from 62 per cent in the fourth quarter of last year. Only 8 per cent said they favoured leaving the EU.

The survey also showed that 83 per cent of CFOs thought the level of uncertainty facing their business was above normal, high or very high, a big jump from 64 per cent at the end of 2015 and the highest level in over three years.

The June 23 referendum represented the biggest single concern for businesses, ahead of slow growth in the euro zone.

Most economists believe that Britain's exit, or Brexit, would wreak havoc with the pound, cut growth, damage the financial centre of the City of London and provoke a lengthy period of uncertainty, with no guarantee that Britain could quickly negotiate free trade agreements.

"The referendum appears to already be contributing to a slowdown," said Mr David Sproul, chief executive of Deloitte.

"We have seen a marked slowdown in M&A (merger and acquisitions) activity as businesses put plans on hold for now."

There were also fewer plans for hiring and capital spending, Deloitte said.

Britain's economic growth slowed in late 2015 but remains stronger than in most other rich countries. Economists say the approach of the referendum is likely to slow growth temporarily but a vote to leave would deliver a bigger hit, at least in the short term.

The Deloitte survey found only 26 per cent of firms had made contingency plans for a possible British exit of the EU, with 53 per cent making no such plans and the rest declining to answer.

Most economists believe that Britain's exit, or Brexit, would wreak havoc with the pound, cut growth, damage the financial centre of the City of London and provoke a lengthy period of uncertainty, with no guarantee that Britain could quickly negotiate free trade agreements. The uncertainty has already hurt the pound, which just had its worst quarter since 2008 versus the euro.

According to the Financial Times, the cost of buying insurance protection from a plunge in the value of the pound after the referendum has soared to levels higher than those during the 2008 financial crisis.

An online poll by market research firm TNS released last Friday showed the rival campaigns for Britain to stay in or leave the EU running neck and neck. The "in" and "out" camps both had support from 35 per cent of respondents in the poll, with 30 per cent still undecided.

REUTERS, BLOOMBERG, NEW YORK TIMES

A version of this article appeared in the print edition of The Straits Times on April 05, 2016, with the headline 'Big UK firms 'delaying deals ahead of EU vote''. Print Edition | Subscribe