© Reuters. FILE PHOTO: People walk along the bank of the River Thames in London, Britain, October 2, 2022. REUTERS/Henry Nicholls
By William Schomberg
LONDON (Reuters) – More large British companies view borrowing as expensive than at any time in the past decade, due partly to financial market turmoil caused by the government’s “mini-budget”, according to a survey published on Monday.
The quarterly Deloitte UK CFO Survey found 56% of chief financial officers at top companies thought credit was costly, the most since 2010. Some 39% said new credit not easy to get.
“A 12-year period of easy credit conditions is drawing to an end,” Ian Stewart, chief economist at Deloitte, said. “Not since the credit crunch have CFOs rated debt – whether that’s bank borrowing or corporate bonds – as being less attractive as a source of finance for their businesses than they do today.”
CFOs who responded after Sept. 23’s mini-budget were more likely to report high credit costs than those who responded before, Deloitte said.
British borrowing costs in financial markets jumped in late September after the finance minister at the time, Kwasi Kwarteng, announced 45 billion pounds ($50 billion) of unfunded tax cuts.
Kwarteng was fired on Friday by Prime Minister Liz Truss who also announced a U-turn on the country’s corporate tax rates. She had wanted to freeze them but they will now rise in April, as planned by the previous government of Boris Johnson.
The Deloitte survey found CFOs on average saw a 78% chance that Britain would fall into recession in the next 12 months, and had tilted towards defensive strategies which prioritised cost reduction and cash control.
The survey of 87 CFOs, including 23 from companies and 30 from firms, took place between Sept. 20 and Oct. 3.
($1 = 0.8917 pounds)