UK business optimism sees record post-election rebound

A photo taken on May 23, 2016, showing the skyline of central London with pedestrians in the foreground. PHOTO: AFP

LONDON (REUTERS) - Optimism at major British companies has improved by the largest margin in at least 11 years after Prime Minister Boris Johnson won a sweeping election victory last month, according to a survey from accountants Deloitte released on Thursday (Jan 9).

Some 53 per cent of chief financial officers at large businesses said their optimism about the financial outlook had improved compared with three months ago, versus 9 per cent in the last survey conducted in October.

This was the highest proportion since the quarterly survey began 11 years ago, Deloitte said.

The figures are the strongest sign yet that a rebound in business sentiment may be underway, after more tentative evidence from a survey of purchasing managers on Monday.

Britain's economy slowed to a crawl late last year, with the most recent official growth data showing the joint-weakest annual expansion since 2012.

"The fog of uncertainty that has lingered over the UK since the 2016 EU referendum is lifting. CFOs ... are beginning 2020 with sentiment levels that would have been unimaginable at any time in the last three years," Deloitte chief economist Ian Stewart said.

During the election campaign, Johnson said weak business investment in 2019 was due to parliament's prevarication over approving a Brexit deal, and predicted a rebound if he gained a strong majority in parliament.

Many businesses were also concerned by the opposition Labour Party's plans to nationalise rail operators, utilities and broadband infrastructure.

Just over half of chief financial officers said they expected revenues to rise over the next year, up from 18 per cent three months ago, and 38 per cent said they planned to invest more, the highest proportion in four years.

Deloitte conducted the survey between Dec 16 and Jan 6, and spoke to 119 chief financial officers of British listed companies, large private firms and British subsidiaries of big foreign companies. The 94 listed companies accounted for just over a quarter of the British stock market, by value.

Brexit has dropped to third in CFOs' list of worries from the top spot three months ago, despite uncertainty over whether Johnson will be able to negotiate a post-Brexit trade deal in the narrow 11-month window he has set himself.

Some two thirds of CFOs said they expected Brexit to damage the business conditions, down from more than four fifths earlier in 2019.

Weak domestic demand was the biggest risk, according to CFOs, though it was less of a worry than three months earlier.

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