More Than Half Of U.K. CFOs Expect Spending, Hiring Cuts This Year

• Business confidence in the U.K. drops to a two-year low, with 26% of CFOs feeling pessimistic.
• Cost-cutting remains top priority, with 58% of CFOs expecting companies to reduce discretionary spending.
• The U.S. is seen as the most attractive investment destination, while U.K. investment appeal has sharply declined.

Business optimism among U.K. Chief Financial Officers (CFOs) has taken a hit, reaching its lowest point in two years by the close of 2024. 

A new survey by Deloitte shows that a net 26% of CFOs feel more pessimistic about their company’s prospects than they did three months ago — a notable shift into negative territory not seen since the spring of 2023. 

While confidence is down, it’s still well above the depths of despair experienced during the tough years of 2020 and 2022.

As CFOs look to 2025, they’re gearing up for a year of tighter budgets. 

The impending rise in National Insurance Contributions (NICs) has prompted many to zero in on cost-cutting measures. 

When asked how they plan to respond to this increase, trimming expenses topped the list, far outpacing other options like boosting productivity or raising prices for customers. 

This focus on reducing costs is nothing new — 52% of CFOs have marked cost control as a major priority for 11 consecutive quarters, a clear sign that businesses are feeling the pressure to rein in spending.

This more cautious approach is spilling over into broader corporate behavior. A hefty 58% of CFOs expect U.K. companies to cut back on discretionary spending within this year, while 64% foresee a slowdown in hiring. 

It’s the lowest employment outlook in four years, and employment expectations have fallen more sharply than at any point since the pandemic’s early days.

Risk appetite is also at a low point, with just 18% of CFOs saying now is a good time to take on more financial risk. 

This marks the weakest sentiment in five quarters, suggesting that businesses are opting for a wait-and-see approach rather than making bold moves.

Despite the gloom, some silver linings appear: economists are predicting that U.K. growth could pick up in the second half of 2025, fueled by favorable fiscal policies and potential interest rate cuts. 

While CFOs are trimming their expectations for investment, hiring, and spending, there’s hope that the U.K. economy will outpace its 2024 forecast and the broader euro area.

Slowing Inflation and Easier Credit Conditions

One area where CFOs see improvement is in inflation. Wage growth, a major concern in recent years, is beginning to slow. 

On average, salaries rose by 4% in 2024, a slight dip from the 4.6% increase seen earlier. Looking to the future, CFOs expect wage growth to slow even further, predicting an average rise of just 3.2% in 2025.

Credit conditions, which were tight throughout 2023, are also showing signs of easing. While credit remains relatively expensive for many businesses, it’s far more accessible than it was a year ago. 

CFOs now rate credit availability more positively, with 41% saying it’s easier to access than in 2023. Still, a majority — 49% — are finding it more costly, reflecting the lingering impact of high interest rates.

Geopolitical Tensions and External Uncertainty on the Rise

Outside of the U.K., geopolitical risks are once again top of mind for CFOs, continuing to top the list of business concerns for the 10th quarter in a row. 

While the U.K.’s competitiveness remains a concern, it’s not as pressing as global issues like economic instability or political turmoil. 

Interestingly, fears about U.S. economic growth have diminished somewhat, likely reflecting the fact that the U.S. economy has shown resilience in the face of global challenges.

In fact, overall uncertainty about the global economy is on the rise. A significant 40% of CFOs report that they face a high or very high level of external uncertainty — this is the highest figure in over a year, though still below the post-Brexit referendum levels when uncertainty soared to 51%.

The U.S. is the Favorite Investment Destination

When it comes to where CFOs are most eager to invest, the U.S. stands out as the clear favorite. 

The survey reveals that a net 59% of CFOs view the U.S. as the most attractive destination for business investment. In comparison, the U.K. has seen a sharp decline in its investment appeal. A net -12% of CFOs now consider the U.K. an attractive place to invest, a steep drop from previous years.

While the U.K. remains more appealing than other developed European economies, the slide in its investment attractiveness is the steepest among major regions. Meanwhile, countries like India and Middle Eastern economies have gained considerable ground over the past decade, with CFOs rating them as much more attractive investment destinations.

Despite a less optimistic outlook for the U.K. in 2025, there’s a sense that, with the right policies, the U.K. could turn things around. However, as it stands, the U.S. is leading the charge, posing a significant challenge for the U.K. to retain its appeal on the global stage.

For now, U.K. CFOs indicate a holding pattern, focusing on managing costs and reducing risk in 2025. With geopolitical risks high and global uncertainty on the rise, it’s clear that businesses are taking a more cautious approach. 

While optimism has dipped, the U.K. economy still holds potential for recovery, and the next 12 months could tell a very different story if conditions improve.