A quarterly survey (8-page / 853KB PDF) of chief finance officers (CFOs) carried out by Deloitte showed that confidence levels about Brexit had dipped by 12 percentage points since the 8 June UK general election. Some 72% of CFOs said the overall business environment would be worse after Brexit, the highest proportion for a year and up from 60% in the first quarter of 2017.
There was also a rise in the number of CFOs who said mergers and acquisitions activity, capital expenditure and hiring would decrease in the next three years as a consequence of Brexit, compared to responses in the first quarter of the year.
The effect of Brexit is seen as the greatest risk to businesses. Weak demand in the UK and the prospect of higher interest rates and a general tightening of monetary conditions were also cited as significant risks in the last quarter.
However, CFOs have become less concerned about emerging market volatility and economic weakness in the eurozone in the last three months, according to the study.
Brexit expert Guy Lougher of Pinsent Masons, the law firm behind Out-Law.com, said: “The most recent data, covering the economic performance to date, highlight the potential future risks of Brexit if there is no negotiated agreement covering future trade with the EU and if there is no transitional arrangement.”
As a result of the declining business confidence, CFOs have become more defensive in the last quarter, focusing more on reducing costs and leverage and increasing cash flow than expansion. A significant minority (43%) rate current levels of external economic and financial uncertainty as high or very high, an increase from the previous quarter.
The survey is the latest sign that businesses are worried about the potential impact of Brexit. Last week a report for the Association of Financial Markets in Europe found that both small and large businesses were worried about access to credit in the event of a 'hard Brexit' and feared risk management would become more expensive.
Business groups have been pressing the UK government to engage with their interests as Brexit negotiations take place with the EU.
The hung parliament also caused a slump in business confidence, according to an earlier survey by the Institute of Directors immediately after the election.