CFOs turn more positive on the UK

CFOs turn more positive on the UK

Deloitte’s second quarter CFO Survey, conducted in the second half of June, shows a surprising degree of resilience among the largest corporates in the UK. Despite the conflict between Israel and Iran, volatility in the oil price and the threat of US tariffs, CFO sentiment and risk appetite have edged up slightly. The survey is available at:

https://www.deloitte.com/uk/en/services/consulting-financial/perspectives/deloitte-cfo-survey.html

• UK CFOs have also become markedly more positive about the UK as a destination for investment. Last December CFOs rated the UK in fifth place out of a field of eight nations and regions as a place to invest, with the US, by a considerable margin, the most favoured destination. This has all changed. Now CFOs rate the UK, along with India, as their preferred investment destinations. Sentiment about investing in developed Europe has risen while the US has seen a precipitous drop in its ranking, falling from first to sixth place.

• The decline in the perceived attractiveness of the US comes after significant downgrades to US growth forecasts in the first half of this year amid concerns about the effect of US tariffs. US assets performed poorly in the first half of 2025, with the US dollar falling by 10% on a trade-weighted basis and US equities underperforming European equities.

• Although tariffs remain a material business risk, the announcement of a limited trade agreement between the US and UK in early May, the only one confirmed at the time of the survey, provides greater certainty for UK businesses. Improving CFO sentiment about developed Europe may partly reflect expectations that rising defence spending and EU-wide economic reform in the wake of the Letta and Draghi Reports will boost European growth. According to the latest Bank of America survey,  institutional fund managers have pivoted decisively from US to euro area equities, underscoring growing optimism about the region in capital markets. Sentiment about the UK has also improved, but to a lesser extent. 

• The findings from the CFO survey fit with a small increase in business sentiment recorded in the latest CBI quarterly survey and a pickup in activity recorded in the June survey of purchasing managers. A swift return to more normal rates of growth in the UK is not on the cards. These surveys suggest weakness, although continued UK growth is expected in the coming months. Given the headwinds from geopolitical uncertainty and tariffs, things could be worse.

OUR REVIEW OF LAST WEEK’S NEWS
The UK FTSE 100 equity index ended the week up 1.3% at 8,941. The UK benchmark index of large-cap stocks has risen 9% so far this year, well below the 25% rise in the broad euro equity index.

Economics

• US president Donald Trump issued a three-week extension to his 90-day pause on the imposition of higher US import tariffs to allow for further negotiations with major trading partners. The new deadline is 1 August
• Mr Trump sent letters to trading partners informing them of the US import tariffs they would face on 1 August if a deal was not reached, including 35% tariffs against Canada, 30% against the EU and Mexico, and 25% tariffs against Japan and South Korea
• Mr Trump also announced plans to impose a 50% tariff on copper imports from 1 August, resulting in a surge in copper prices, as well as proposals for tariffs of up to 200% on pharmaceutical imports
• Despite recent US tariff announcements, Goldman Sachs and Bank of America increased their forecasts for growth in US equity prices over the next year, citing the underlying strength of large US corporates and expectations of more rapid reductions in US interest rates
• The Bank of England said that most UK companies would still be able to service their debts in the face of global shocks, such as sharply higher tariffs, as household and corporate resilience “remains strong in aggregate”
• UK GDP unexpectedly contracted in May by 0.1%, the second consecutive month of decline, highlighting the slowdown in activity compared with the strong first quarter 
• The UK Office for Budget Responsibility said the UK fiscal outlook “remains daunting” as low economic growth and higher interest rates have made addressing high public debt levels “considerably more challenging” 
• There could be a 50-fold increase in heat-related deaths in the UK over the next 50 years if the UK did not adapt to a severe climate change scenario, according to latest research published in the PLoS Climate journal
• Bank of England deputy governor Sarah Breeden warned that the UK economy faces growing threats from climate change in the near future, including the potential for higher inflation due to supply-side shocks 
• The EU said it will delay plans to impose import tariffs on €21bn of US goods until August in the hope of reaching a trading agreement
• Investor sentiment in the euro area increased in July to its highest level since February 2022, with significant increases in Germany following its fiscal expansion plans
• The number of applications for companies wanting to list in Hong Kong reached a record high in the first half of 2025, amid rapid growth of its equity market and interest from Chinese firms looking to expand abroad 

Business

• Insurance costs for ships passing through the Red Sea surged after Houthi rebels resumed attacks on commercial shipping traffic
• Tesla shares fell by nearly 7% after Mr Trump called Elon Musk a “train wreck” in response to Mr Musk’s announcement that he was forming a new political party
• Semiconductor manufacturer Nvidia became the first company with a market valuation of over $4tn
• Italian food group Ferrero agreed to buy breakfast cereal company Kellogg’s in a deal worth $3.1bn
• The UK’s Financial Conduct Authority fined consumer bank Monzo £21m for failing to undertake sufficient checks on high-risk customers
• Greenergy announced plans to close its biodiesel production plant, accounting for a quarter of the UK’s biodiesel production capacity, amid rising competition from US imports
• Asset management company Brookfield is expected to take a 20% stake in the Sizewell C nuclear power plant, making it the largest private investor, while energy company EDF will reduce its shareholding, the FT reports
• UK television broadcaster ITV agreed with Disney to show each other’s programmes across both their streaming platforms as part of a growing relationship between broadcasters and US online streaming services
• UK media regulator Ofcom approved Royal Mail to end its Saturday deliveries of second-class letters in a bid to save costs

Global and political developments

• Mr Trump announced that the US reached a new deal to send air defence systems to Ukraine via purchases through NATO countries
• Russian drone missile attacks continued against Ukraine, mainly targeting the capital city Kyiv
• Israeli prime minister Benjamin Netanyahu met Mr Trump in the US to discuss a ceasefire proposal with Hamas. A deal has not yet been reached
• The EU said it has reached a deal with Israel to substantially increase aid deliveries to Gaza
• Israel struck ports in Yemen held by Houthi rebels following recent attacks on commercial shipping vessels in the Red Sea 
• France and the UK finalised a deal to tackle migrant Channel crossings and pledged to coordinate the use of nuclear weapons to protect against “extreme threats”
• French police raided the headquarters of the far-right Rassemblement National Party as part of an investigation into illegal campaign funding
• Finland and Denmark opposed plans for the EU to issue joint debt for functions other than boosting defence spending, dampening the EU’s ambitions for greater joint capabilities to respond to future crises
• The UK government dropped a zonal electricity pricing proposal and is instead considering other market reforms to achieve its targets of lowering energy prices and decarbonising the electricity grid
• Resident doctors, formally junior doctors, voted to strike for five days in July over pay following escalating tensions between the British Medical Association and the government
• The National Audit Office said that the UK’s F-35 fighter jet programme faces “shortcomings” due to delays and personnel shortages, resulting in an undermining of the UK’s warfighting capabilities

And finally… the annual Wimbledon tennis grand slam took place in the UK over the last two weeks, with over 500,000 spectators and 55,000 tennis balls used. The unusually warm weather was a notable feature of the tournament, even causing UK actor Hugh Grant to fall asleep during the men’s quarter final match – love:40-winks