The turmoil in global financial markets has shattered the confidence of domestic businesses, according to an important snapshot of economic sentiment.
The latest survey of FTSE 350 chief financial officers by the accountant Deloitte points to a sharp fall in confidence in the third quarter of this year.
Some 73 per cent of respondents said the level of financial and economic uncertainty was “above normal”, “high” or “very high”, up from 55 per cent in the preceding quarter.
Uncertainty has not been so high since before the UK’s economic recovery began in earnest in 2013.
The survey was carried out in the wake of the turmoil on global markets, prompted by fears that the Chinese economy is decelerating rapidly. In August, the FTSE 100 had its largest single-day fall since 2009. This followed the “Black Monday” in China when the Shanghai Composite index plummeted by 8.5 per cent.
Only 49 per cent of the CFOs questioned by Deloitte in the third quarter said now is a good time to invest, down from 59 per cent in the second quarter. They scaled down their collective expectation for growth in hiring, capital expenditure and discretionary spending.
Last month, the US Federal Reserve kept interest rates on hold at record lows, despite mounting pressure for a hike to head off inflation. The Bank of England has also held rates at 0.5 per cent.
“Falling corporate risk appetite and sentiment suggests that the Federal Reserve and Bank of England have been absolutely right to maintain interest rates at ultra-low levels,” said Ian Stewart of Deloitte.
But he added: “CFOs still see tighter monetary policy as the number one threat to their businesses.”
The accountant’s poll was conducted between 9 and 28 September, when still markets were still febrile. The combined market capitalisation of the listed companies surveyed is £393bn.
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