Belfast Telegraph

Companies still pessimistic about economic recovery

By Heather McGarrigle

The UK's large companies are pessimistic about economic recovery, yet risk appetite is at its strongest.

Accounting consultancy firm Deloitte released the results of their quarterly survey of finance chiefs at 137 of the UK's major firms. Most of the respondents to the Deloitte CFO Survey expect profits to fall in 2011, by an average of 7%. Finance directors also attached a 29% probability to the chance of a double dip in the economy - up from last year's 27%.

Inflation concerns and fiscal tightening were thought to be dampening optimism.

Consumers seem to be reflecting this caution. Recent household surveys by poll company GfK NOP and Northern Bank show economic confidence at a low ebb at a UK-wide and local level.

However, 41% of finance chiefs believe now is a good time to take risk on to their balance sheets and work towards expansion.

Survey responses reflected a shift in opinion towards raising leverage for the first time since 2008.

Margaret Ewing, Deloitte partner and vice chair, said external events, such as events in the Middle East and the earthquake in Japan, could be having a negative effect on the outlook of finance chiefs.

She said: "By contrast, high levels of risk appetite seem to reflect longer term judgements and more positive views on corporate balance sheets, the opportunities available to companies and financial conditions."

Finance directors also believe the first rise in UK interest rates is in sight, reflecting the views of leading Northern Ireland economists.

Last Thursday, the Monetary Policy Committee chose to freeze the cost of borrowing at 0.5%, keeping it at its record low for the 25th month in a row.