ONLY WAY IS UP

Europe’s chief financial officers are expecting rate hikes over the next year (except for Russia)

The Bank of England recently hiked interest rates for the first time in 10 years, and chief financial officers at some of Europe’s largest companies expect more hikes to follow.

Some 1,546 CFOs took part in Deloitte’s sixth bi-annual European CFO Survey, representing firms across 19 countries that include France, Germany, Norway, Russia, Spain, Switzerland, Turkey, and the UK. Among them, Russia was the only country to overwhelming predict a decline in interest rates. A majority of those surveyed (57%) said they expected interest rates to climb in their countries over the next 12 months.

(Deloitte’s survey was conducted between August and September, while the BOE’s hike—to 0.5% from 0.25%—took place earlier this month).

Countries that are most convinced rates will rise over 12 months
UK 92%
Belgium 85%
Sweden 78%
Germany 62%
Austria 60%
France 60%

European CFOs are split on whether interest rate hikes will change their corporate strategy. Exactly half said that a rate change would not lead them to alter their plans. Among those considering changes to company strategy, 9% plan on reducing leverage, while 8% aim to reduce their firm’s debt, and 8% will re-evaluate where their company is investing its money.

Deloitte’s survey suggests that finance chiefs are increasingly optimistic, and looking to hire more people and spend more capital. Some 43% of respondents said they are more optimistic about their company’s prospects than they were three months ago; only 11% are less optimistic. French CFOs are the most positive at 78%, whereas finance chiefs in the Netherlands (23%) are the least.

“With the economic outlook improving and levels of uncertainty receding, CFOs are able to shift their focus to longer term issues, planning for more expansionary strategies and capital investment,” the report says. “Given the current economic outlook, there seems no better time to face up to the continuing challenges posed by trends in globalization, digitization and an aging population.

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