Companies ready to splash the cash as appetite for risk returns, says Deloitte

For first time since 2011, expansion higher priority than cutting costs and building up cash among large UK firms, finds survey

The appetite for risk among Britain's big businesses is at its highest since before the financial crisis and companies are finally ready to start spending their cash piles, according to the latest upbeat survey on the UK economy.

For the first time since 2011, expansion is a higher priority than cutting costs and building up cash for the chief financial officers (CFOs) at some of the UK's largest companies, says the financial services firm Deloitte. The launch of new products and new markets is being put ahead of the defensive strategy of cash hoarding that has characterised big businesses since the global financial crisis.

It will bring some comfort to chancellor George Osborne as he continues to espouse a rebalancing of the UK economy towards business spending and exports in the face of official data suggesting investment and trade remain subdued.

Deloitte's quarterly survey puts corporate risk appetite at a six-year high. It suggests CFOs are at their most optimistic for almost three years as they become more confident in the global economic outlook and the prospects of the eurozone holding together.

Ian Stewart, chief economist at Deloitte, said there was a new mood of confidence among the 116 CFOs, including those at FTSE 100 companies.

"The defensive strategies of cost cutting and cash accumulation that saw corporates through the global financial crisis are increasingly out of favour. The priority now is expansion and the balance-sheet cycle has turned decisively towards growth," he said.

"In a reversal of the situation six months ago, CFOs believe that UK growth will have a more positive effect on their investment plans in the next year than growth in emerging markets or in the US, Japan and Asia Pacific."

The survey showed 54% of financial officers thought it was a good time to take risk on to their balance sheet. It also suggested a greater focus on capital spending and a brighter employment outlook, with hiring expectations at a three-year high.

This quarter's survey asked CFOs a one-off question about the perceived benefits of the UK's membership of the European Union.

A majority – a net 89% – of respondents said membership benefited the UK's exports and there was a widespread view that it boosted UK business in other ways, including by attracting foreign direct investment. The only area of negativity surrounded the EU's legal, regulatory and compliance framework.

The upbeat tone of the survey chimes with recent economic data, but companies' apparent intention to start spending again contrasts with official data. Business investment numbers were revised sharply lower last week to show a 2.7% drop in the second quarter. The contribution of net trade was also revised down.

The Capital Economics thinktank described those numbers as disappointing but cautioned against taking them as a sign the recovery was doomed to be unbalanced.

"We would not be too alarmed by the current balance (or lack of it!) of the UK economy. With the recovery now looking more secure, we think there are good reasons for investment and exports to play a larger role in the economy," said Martin Beck, UK economist at Capital.

He expects this week's Purchasing Managers Index (PMI) surveys on the services, construction and manufacturing sectors to show the "recovery remains in train".

Insolvency numbers published on Monday point to a stronger economic backdrop for companies.

The business insolvency rate in August was down year-on-year to 0.08% from 0.09%, marking the 12th month it had either improved or remained stable, said information company Experian.

Nine of the 11 regions saw drops in the insolvency rate, with the biggest fall coming in north-east England.

"We haven't seen such a prolonged period of stability and improvement in insolvencies for a while and the figures signal an increasingly robust business population, which bodes well for growth," said Max Firth, at Experian Business Information Services.

Skills fear

An acute shortage of skills in the UK labour market risks derailing the nascent economic recovery, a new report warns.

Skilled jobs are going unfilled because of a lack of suitable candidates, with the mismatch most serious in the oil and gas sector, IT and construction, according to a study by recruitment company Hays and Oxford Economics.

In Europe, the only countries facing greater talent mismatch challenges are Spain, Portugal and Ireland, the analysis of 30 economies suggests.

The authors are urging the UK government to change immigration policy to attract skilled workers and to implement education policies to meet businesses' needs.

Hays' chief executive Alistair Cox said businesses must get the talent they needed, regardless of nationality. "The alternative is to leave these skilled roles unfilled, leading to reduced investment, lower GDP growth and lower future job creation for the local workforce." © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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