Find out more at http://www.deloitte.co.uk/cfosurvey With low levels of uncertainty, improved access to finance and greater confidence in the Bank of England's policies, Chief Financial Officers (CFOs) are gearing up for expansion, investment and hiring in 2014. The Deloitte CFO Survey, launched in 2007, is a quarterly survey of Chief Financial Officers and Group Finance Directors of major UK companies. Over 300 CFOs, mainly from FTSE 350 companies, have joined the CFO Survey panel. The Survey captures shifts in UK CFOs' opinions on valuations, risks and financing and has become a benchmark for gauging financial attitudes of major corporate users of capital. The Deloitte CFO Survey has been widely quoted in the media and is firmly established with policymakers. The Bank of England has cited the CFO Survey several times in its publications such as the quarterly Inflation Report and the monthly Trends in Lending report. The findings have also been quoted in the minutes of the Bank's Monetary Policy Committee meetings.

1. Q4 2013
The Deloitte CFO Survey
2014 outlook: Expansion, investment and hiring
The Chief Financial Officers of the UK’s largest companies enter
2014 in buoyant mood. A record 57% of CFOs say this is a good
time to take risk and business optimism is running at the highest
level in three-and-a half years.
Uncertainty and credit shortages, two major blocks to business
activity, have eased substantially. CFOs’ perceptions of financial
and economic uncertainty have dropped to the lowest level in
more than three years. CFOs attach a 16% probability to the
UK falling back into recession in the next two years, down from
40% a year ago. Large corporates have good access to capital
and CFOs are more positive about financing their businesses
with equities or bonds than at any time in the last six years.
The banking system is working again and a record 80% of
CFOs say that bank credit offers an attractive source of finance.
December 2013
The top priority for CFOs in 2014 is expansion, whether through
introducing new products or services or moving into new
markets. CFOs are also placing greater emphasis on capital
spending and 88% expect M&A activity to increase over the
next 12 months. Our index of corporate expansion is back
to levels last seen in early 2011 when the UK looked set for
sustained recovery.
CFOs say that the policies of the new Bank of England Governor,
Mark Carney, have made them more positive about the outlook
for the UK economy. But a majority believe that inflation will
be running well above the Bank’s target in two years’ time and
most CFOs expect the Bank to raise interest rates by the middle
of 2015.

2. The Deloitte CFO Survey
The message from this survey is that the UK’s largest
companies are gearing up to expand, invest and hire.
This quarter’s findings bode well for the broad‑based recovery
policymakers hope to see in 2014.
To access current and past copies of the survey, historical
data and media coverage, please visit:
www.deloitte.co.uk/cfosurvey
Authors
Contacts
Ian Stewart
Chief Economist
020 7007 9386
istewart@deloitte.co.uk
Ian Stewart
Chief Economist
020 7007 9386
istewart@deloitte.co.uk
Debapratim De
Senior Economic Analyst
020 7303 0888
dde@deloitte.co.uk
Mark FitzPatrick
Vice Chairman and
CFO Programme Leader
020 7303 5167
mfitzpatrick@deloitte.co.uk
Alex Cole
Economic Analyst
020 7007 2947
alecole@deloitte.co.uk

3. The Deloitte CFO Survey
Chart 1. Risk appetite
% of CFOs who think this is a good time to taker greater risk onto their balance sheets
60%
50%
40%
30%
20%
10%
0%
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q3
2011
Q1
2011
Q3
2012
Q1
2012
Q3
2013
Q1
2013
Q3

4. Buoyant optimism
UK CFOs enter 2014 in more optimistic mood than for three-and-a-half years.
Chart 2. Business confidence
Net % of CFOs who are more optimistic about financial prospects for their company now than three months ago
Less optimistic
More optimistic
70%
50%
30%
10%
-10%
-30%
-50%
-70%
2007
Q3
2008
Q2
2009
Q1
2009
Q4
2010
Q3
2011
Q2
2012
Q1
2012
Q4
2013
Q3

5. Buoyant optimism
This rise in optimism has been matched by a gradual fall in
CFO perceptions of economic uncertainty over the last year.
60% of CFOs report that the level of economic and financial
uncertainty facing their businesses is above normal, high or very
high – the lowest reading in more than three years.
Chart 3. Uncertainty
% of CFOs who rate the level of external financial and economic uncertainty facing their business as above normal,
high or very high
100%
95%
90%
85%
80%
75%
70%
65%
60%
55%
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
2012
Q3
2012
Q4
2013
Q1
2013
Q2
2013
Q3
2013
Q4

6. Buoyant optimism
CFOs’ views on the likelihood of a euro break‑up remain
largely unchanged.
They now assign a 10% probability to the euro area breaking
up in the next 12 months, marginally higher than last quarter’s
estimate but well below the average reading in 2012.
Chart 4. Average probability of euro secession
Probability assigned by UK CFOs to the likelihood of any of the existing members of the euro area not being in the single
currency in the next 12 months
40%
37%
36%
35%
30%
27%
26%
25%
22%
20%
18%
15%
9%
10%
8%
2013
Q2
2013
Q3
10%
5%
0%
2011
Q4
2012
Q1
2012
Q2
2012
Q3
2012
Q4
2013
Q1
2013
Q4

7. Positive on revenues
The UK economy grew at a faster‑than‑expected pace in the
first three quarters of 2013. Activity is widely expected to
accelerate in 2014.
Fears that the UK could slide into another recession have eased.
On average, CFOs assign a 16% probability to the UK falling
into another recession in the next two years, down from
40% a year ago.
Chart 5. Average probability of a renewed recession
Probability assigned by UK CFOs to the likelihood of a renewed recession in the next two years
60%
55%
50%
45%
40%
35%
30%
25%
20%
15%
2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4

8. Positive on revenues
CFOs’ expectations for revenues and profits are at the highest level in three-and-a-half years.
Chart 6. Outlook for corporate revenues and margins
Net % of CFOs who expect UK corporates’ revenues and margins to increase over the next 12 months
100%
Increase
80%
60%
Revenues
40%
20%
Decrease
0%
-20%
Operating margins
-40%
-60%
-80%
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
2012
Q3
2012
Q4
2013
Q1
2013
Q2
2013
Q3
2013
Q4

9. Positive on revenues
Executives of small businesses seem to share the growing
optimism of the CFOs of the UK’s largest companies polled in
this survey.
Business optimism among small enterprises has hit a 25‑year
high according to the Confederation of British Industry’s (CBI)
Industrial Trends Survey.
Chart 7. Small business optimism
CBI Industrial Trends Survey: Net % of small businesses expressing an improvement in optimism over their
financial prospects
60%
40%
20%
0%
-20%
-40%
-60%
-80%
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013

10. Few capital constraints
Financing conditions remain benign for the UK’s largest
corporates.
The cost of credit hit a new six‑year low in the fourth quarter
and credit availability is close to a six-year high.
80%
60%
100%
Cost of credit (LHS)
60%
40%
40%
20%
20%
Credit is cheap
0%
0%
-20%
-20%
-40%
-60%
80%
-40%
Availability of credit (RHS)
-80%
-60%
-80%
-100%
2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
-100%
Credit is hard to get
Credit is costly
100%
Credit is available
Chart 8. Cost and availability of credit
Net % of CFOs reporting credit is costly and credit is easily available

11. Few capital constraints
For the first time since the financial crisis, CFOs report that
bank borrowing is the most attractive source of funding.
Equity issuance has also continued to gain favour as a source
of corporate funding.
Chart 9. Favoured source of corporate funding
Net % of CFOs reporting the following sources of funding as attractive
Attractive
100%
Bond issuance
80%
60%
40%
Bank
borrowing
20%
0%
Unattractive
-20%
-40%
-60%
Equity issuance
-80%
-100%
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q3
2011
Q1
2011
Q3
2012
Q1
2012
Q3
2013
Q1
2013
Q3

12. Few capital constraints
CFOs expect all forms of capital raising – bond issuance, bank
borrowing and equity issuance – to increase in 2014.
According to the Bank of England’s latest Credit Conditions
Survey, capital investment and commercial real estate activity are
the biggest factors driving demand for credit among corporates.
Chart 10. Outlook for bond issuance, bank borrowing and equity issuance
Net % of CFOs who expect bond issuance, bank borrowing and equity issuance by UK corporates to increase over
the next 12 months
60%
48%
50%
45%
40%
35%
30%
20%
10%
0%
-10%
-20%
Bond issuance
2013 Q4
2012 Q4
Bank borrowing
Equity issuance

13. Expansion is the top priority
Introducing new products or services or expanding into new
markets is the top priority for CFOs in 2014.
CFOs are placing greater emphasis on cost reduction, but also
on expanding by acquisition and increasing capital expenditure.
Chart 11. Corporate priorities in the next 12 months
% of CFOs who rated each of the following as a strong priority for their business in the next 12 months
40%
40%
Introducing new products/services
or expanding into new markets
35%
35%
Increasing cash flow
34%
Reducing costs
29%
Expanding by acquisition
20%
Increasing capital expenditure
15%
Raising dividends or
share buybacks
11%
9%
9%
Disposing of assets
Reducing leverage
15%
7%
2013 Q4
9%
2013 Q3
20%
23%

14. Expansion is the top priority
CFOs enter 2014 with a clear focus on expansionary strategies.
Chart 12. CFO priorities: Expansionary vs. defensive strategies
39%
37%
35%
33%
Defensive strategies
31%
29%
27%
25%
Expansionary strategies
23%
21%
19%
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
2012
Q3
2012
Q4
2013
Q1
2013
Q2
2013
Q3
2013
Q4
Arithmetic average of the % of CFOs who rated expansionary and defensive strategies as a strong priority for their
business in the next 12 months.
Expansionary strategies are introducing new products/services or expanding into new markets, expanding by acquisition
and increasing capital expenditure.
Defensive strategies are reducing costs, reducing leverage and increasing cash flow.

15. Corporates planning to spend
CFO expectations for growth in hiring, capital expenditure and discretionary spending hit three‑and-a-half-year highs
this quarter.
Chart 13. Outlook for capital expenditure, hiring and discretionary spending
Net % of CFOs who expect UK corporates’ capital expenditure, hiring and discretionary spending to increase over
the next 12 months
Increase
80%
Hiring
60%
40%
Capital expenditure
20%
0%
Discretionary
spending
Decrease
-20%
-40%
-60%
-80%
-100%
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
2012
Q3
2012
Q4
2013
Q1
2013
Q2
2013
Q3
2013
Q4

16. Corporates planning to spend
In this quarter’s special questions we asked CFOs about
monetary policy.
A strong net balance of CFOs say the policies of the new Bank of
England Governor, Mark Carney, have made them more positive
on the UK economy. But most expect the Bank to raise interest
rates by mid-2015 and almost a quarter expect rates to rise in 2014.
Chart 14. Rate rise expectations
% of CFOs who expect the first increase in the Bank of England’s interest rate to occur at the following times
40%
36%
35%
33%
30%
25%
21%
20%
15%
10%
5%
0%
5%
2%
2014 H1
3%
0%
2014 H2
2015 H1
2015 H2
2016 H1
2016 H2
After 2016

17. Corporates planning to spend
CFOs are sceptical that the Bank of England will be able to hit
its inflation target.
A majority expect consumer price inflation to be significantly
above the Bank’s 2.0% target in two years’ time.
Chart 15. Inflation expectations
% of CFOs who expect consumer price inflation in the UK to lie between the following ranges in two years’ time
60%
50%
45%
48%
40%
30%
20%
10%
0%
0%
Below zero
5%
2%
0-1.5%
1.5%-2.5%
2.5%-3.5%
Above 3.5%

18. CFO Survey: Economic and financial context
The macroeconomic backdrop to the Deloitte
CFO Survey Q4 2013
Business confidence in most of the industrialised world
improved while prospects for growth in many emerging
economies softened. In December, the US Federal Reserve
announced that it would start to slow the pace of its
programme of Quantitative Easing.
UK data were generally stronger than expected with a number
of consumer-related sectors faring well. The Bank of England
Governor, Mark Carney, said that recovery “is taking hold” in
the UK and the Bank raised its forecast for UK growth in 2014.

19. Economic and financial context
UK GDP growth: Actual and forecast (%)
6
UK to see continued recovery in 2014
Forecasts
4
2
0
Quarter-on-quarter
growth
-2
-4
Year-on-year
growth
-6
-8
2007
2008
2009
2010
2011
2012
Source: ONS, consensus forecasts from The Economist and Deloitte calculations
2013
2014

20. Economic and financial context
VIX Index – a measure of equity market volatility
90
80
Low levels of
financial stress
Greater financial stress
70
60
50
40
30
20
10
0
2007
2008
Source: Thomson Reuters Datastream
2009
2010
2011
2012
2013

21. Economic and financial context
UK private and public sector job growth (thousands)
500
Public sector
400
Private sector
Private sector hiring offsets
public sector job losses
300
200
100
0
-100
-200
-300
Q1
2007
Source: ONS
Q4
2007
Q3
2008
Q2
2009
Q1
2010
Q4
2010
Q3
2011
Q2
2012
Q1
2013

22. Economic and financial context
UK annual CPI inflation (%)
9
8
7
UK inflation down significantly from 2011 peak
6
5
4
3
2
1
0
91
Source: ONS
93
95
97
99
01
03
05
07
09
11
13

23. Two-chart summary of key survey messages
Uncertainty
% of CFOs who rate the level of external financial and economic uncertainty facing their business as above normal,
high or very high
100%
95%
90%
85%
80%
Uncertainty at
3-year low
75%
70%
65%
2013 Q4
2013 Q3
2013 Q2
2013 Q1
2012 Q4
2012 Q3
2012 Q2
2012 Q1
2011 Q4
2011 Q3
2011 Q2
2011 Q1
2010 Q4
55%
2010 Q3
60%

24. Two-chart summary of key survey messages
CFO Priorities: Expansionary vs. defensive strategies
39%
Expansion is top priority for 2014
37%
35%
33%
Defensive strategies
31%
29%
27%
25%
Expansionary strategies
23%
2013 Q4
2013 Q3
2013 Q2
2013 Q1
2012 Q4
2012 Q3
2012 Q2
2012 Q1
2011 Q4
2011 Q3
2011 Q2
2011 Q1
2010 Q4
19%
2010 Q3
21%
Arithmetic average of the % of CFOs who rated expansionary and defensive strategies as a strong priority for their
business in the next 12 months.

25. About the survey
This is the 26th quarterly survey of Chief Financial Officers and Group Finance
Directors of major companies in the UK. The 2013 fourth quarter survey took
place between 22nd November and 9th December. 122 CFOs participated,
including the CFOs of 32 FTSE 100 and 41 FTSE 250 companies. The rest were
CFOs of other UK‑listed companies, large private companies and UK subsidiaries
of major companies listed overseas. The combined market value of the 84 UK‑listed
companies surveyed is £641 billion, or approximately 30% of the UK quoted
equity market.
The Deloitte CFO Survey is the only survey of major corporate users of capital
that gauges attitudes to valuations, risk and financing. To join our panel of
CFO respondents and for additional copies of this report, please contact
Tulaine Trimble on 020 7007 1684 or email ttrimble@deloitte.co.uk
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firms, each of which is a legally separate and independent entity. Please see www.deloitte.co.uk/about for a detailed description of the legal structure
of DTTL and its member firms.
Deloitte LLP is the United Kingdom member firm of DTTL.
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