Finance chiefs recover from spring gloom

Confidence among Britain's finance chiefs is bouncing back but fears still remain over the UK slumping back into recession in the next two years, leading consultants have warned.

Deloitte's quarterly survey of chief financial officers showed a more upbeat mood between July and September, with confidence recovering from a spring slump as a double-dip recession was confirmed and eurozone fears grew.

The UK is set to pull out of recession in the current quarter, but finance chiefs put the chances of the country escaping a renewed contraction in the next two years at little better than 50-50. One in four, meanwhile, expect a member country to pull out of the euro within the next 12 months.

Deloitte's survey drew on more than 100 finance chiefs at major companies. Sentiment has been improved by the Federal Reserve's action to pump billlions more into the US recovery, as well as plans to prop up the eurozone's strugglers by buying up debt. But spending plans are still restrained by the uncertain environment, the firm warned.

Deloitte's chief economist, Ian Stewart, said: "While central bank activism helped fuel a strong rally in global equity markets between June and mid-September, the finance chiefs take a more cautious longer-term view. The fog of economic uncertainty is hitting investment. CFOs are focusing on strengthening balance sheets, with a particular focus on generating cash and reducing costs."

Despite the uncertainty and weak growth, only one in five finance bosses expect revenues to decline over the next year. Although the eurozone is the destination for 40 per cent of export revenues, respondents said demand from emerging markets and industrialised countries such as the US and Japan should offset weakness in Europe.

Meanwhile the Bank of England's £80bn Funding for Lending scheme is lowering the cost of borrowing.