Deloitte survey finds domestic uncertainty is the biggest brake on British competitiveness, as finance chiefs brace for higher inflation and interest rates while prioritising cost-cutting over expansion.
Britain’s economic uncertainty is forcing corporate finance chiefs into a defensive crouch, with political instability, tax concerns and mounting geopolitical risks threatening competitiveness just as businesses prepare for the Chancellor’s next Budget.
Deloitte’s latest survey of UK chief financial officers, conducted between 17 September and 1 October, found domestic economic and political uncertainty was the biggest constraint on the country’s competitiveness. Regulation ranked second and taxation third, ahead of energy costs and labour costs.
The findings deliver a warning about the business climate confronting the government: companies are not simply grappling with immediate cost pressures, but struggling to plan investment against a backdrop of unpredictable policy and persistent economic risk.
“A decade of leadership turnovers, growing political fragmentation and near-constant speculation on tax policy has clouded the backdrop for business,” said Debapratim De, chief economist at Deloitte UK.
“As the Chancellor prepares to deliver her first Budget, businesses are looking for policy stability, deregulation, and lower, simpler taxes to underpin improved UK competitiveness.”
The survey places political uncertainty at the centre of corporate concerns, suggesting that the government’s ability to establish a predictable economic framework could prove as important to business confidence as any individual tax or spending measure.
Geopolitics remains the biggest external risk facing British businesses, scoring an average of 67 out of 100 among CFOs. Although slightly below the 68 recorded in the second quarter, it has topped the ranking for more than three years.
The prospect of further interest rate rises and tighter monetary conditions in Britain and the US has also become more concerning. CFOs rated this risk at 65, up from 59 in the previous survey.
The combination threatens to complicate investment decisions, as businesses weigh the cost of financing against uncertainty over demand, international tensions and domestic policy.
Finance chiefs have also raised their expectations for inflation. They now anticipate inflation of 3.4 per cent in 12 months, compared with 3 per cent in the previous survey.
Their expectations for the Bank of England’s interest rate have risen to 4 per cent, above the current rate of 3.75 per cent.
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