EU - UK flag

Support for the UK remaining a member of the European Union has risen among Chief Financial Officers (CFOs) of the UK’s largest companies, according to Deloitte’s latest CFO Survey.

The business environment has become more challenging, with CFO perceptions of uncertainty up sharply and risk appetite at three year lows. CFOs are prioritising defensive strategies and plans for hiring and capital spending have dipped. 120 CFOs of FTSE 350 and other large private companies participated in the Q1 2016 CFO Survey.

Three quarters (75%) favour the UK remaining in the EU, up from 62% in Q4 2015 and 74% in Q2. But more CFOs now believe UK business would benefit from leaving the EU, rising to 8% from 6% in the last quarter.

Eighty-nine per cent said EU membership has helped UK export performance and 86% say it has attracted foreign direct investment. 71% say membership has contributed to the success of UK financial services and 68% say it has boosted the UK’s influence and connections with the rest of the world. All these measures are broadly unchanged since this question was asked in the Q2 2015 Survey.

78% of CFOs say the UK benefits from the free movement of people, though this has fallen from 87% in Q2 2015.

CFOs also rank the EU referendum as the biggest risk their businesses face. On a scale of 0 to 100 (where 100 is the greatest risk) CFOs gave the EU referendum a risk rating of 54, up from 50 in Q4 2015. The EU referendum ranked ahead of economic weakness in the euro area (48), weak demand in the UK (46) and the prospect of higher interest rates in the UK (44).

26% of CFOs say their company has made, or is in the process of making contingency plans for a possible British exit of the EU. However, 53% have made no such plans.

David Sproul, senior partner and chief executive of Deloitte, said: “These results show a high level of support among Chief Financial Officers for the UK remaining a member of the European Union.

“CFOs see significant benefits in UK membership, particularly in terms of helping UK exports, attracting investment and strengthening the UK’s influence and connections with the wider world.

“However, we are already seeing the unsettling effect of the referendum on business sentiment. Our survey shows declining risk appetite among CFOs, with the referendum rated as the top risk their business faces, and we have seen a marked slowdown in M&A activity as businesses put plans on hold for now.

“While voices on both sides of the debate argue about the potential economic impact of a ‘leave’ vote, the referendum appears to already be contributing to a slowdown.”