Deloitte 2013 Q1 CFO survey. 42% of 300 CFO surveyed had cost cutting as a strong priority.

1. The fog of economic uncertainty which has
been a dominant feature of the CFO Survey
for the last five years showed some signs of
clearing in the first quarter.
Chief Financial Officers’ perceptions of
macroeconomic and financial uncertainty
have dropped to a two-and-a-half-year
low. And, despite the crisis in Cyprus, CFOs
are more confident that the euro area will
hold together. Lower uncertainty has lifted
business confidence for a third consecutive
quarter and corporate appetite for risk is not
far off the peaks seen in early 2011 when
Europe looked set for a sustained recovery.
Reduced stress in financial markets has
delivered improvements in credit conditions
for large UK corporates. CFOs say credit is
more available and cheaper than at any time
since the survey started in September 2007.
CFOs have edged away from their previous
emphasis on cost control and cash flow.
Our index of corporate defensiveness,
having trended higher for two-and-a-half
years, has declined sharply.
British business looks set to benefit from a
less risky, and improving, global economic
backdrop. UK-based businesses with strong
overseas exposure are shifting towards
more expansionary policies. UK-focused
businesses remain defensive, but optimism
among these companies has risen too.
Overall this quarter’s survey shows
a strikingly broad-based rise in confidence
among the UK’s largest businesses.
Q1 2013
Authors
Ian Stewart
Chief Economist
020 7007 9386
istewart@deloitte.co.uk
Debapratim De
Senior Economic Analyst
020 7303 0888
dde@deloitte.co.uk
Alex Cole
Economic Analyst
020 7007 2947
alecole@deloitte.co.uk
Contacts
Ian Stewart
Chief Economist
020 7007 9386
istewart@deloitte.co.uk
Mark FitzPatrick
Vice Chairman and
CFO Programme Leader
020 7303 5167
mfitzpatrick@deloitte.co.uk
Fewer risks, greater optimism
The Deloitte CFO Survey
Chart 1. Uncertainty
% of CFOs who rate the level of external financial and economic uncertainty facing their business as
above normal, high or very high
72
77
82
87
92
97
2013
Q1
2012
Q4
2012
Q3
2012
Q2
2012
Q1
2011
Q4
2011
Q3
2011
Q2
2011
Q1
2010
Q4
2010
Q3
April 2013

2. CFO Survey Q1 2013 Fewer Risks, greater optimism2 |2 |
Optimism rises
CFO optimism about financial
prospects for their own
companies has risen for the
third consecutive quarter.
Companies that generate a
large share of their revenues
abroad and those that are
more UK-focused have both
become more optimistic.
Greater optimism among
CFOs is also reflected in the
continued easing of their fears
of a euro breakup, despite the
crisis in Cyprus.
CFOs now attach an 18%
probability to the euro
breaking up in 12 months
– exactly half the level last
summer.
Our panel of CFOs, mostly
representing large UK
corporates, also report
a continued improvement
in credit conditions.
CFOs report credit is cheaper
and more easily available now
than at any time in the past
five years.
Chart 2. Financial prospects
Net % of CFOs who are more optimistic about financial prospects for their company now than
three months ago
LessoptimisticMoreoptimistic
-70
-50
-30
-10
10
30
50
70
13
Q1
12
Q3
12
Q1
11
Q3
11
Q1
10
Q3
10
Q1
09
Q3
09
Q1
08
Q3
08
Q1
07
Q3
Chart 3. 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 (%)
2013 Q12012 Q42012 Q32012 Q22012 Q12011 Q4
37%
26%
36%
27%
22%
18%
Chart 4. Cost and availability of credit
Net % of CFOs reporting credit is costly and credit is easily available
Cost of credit (LHS)
Availability of credit (RHS)
CreditiscostlyCreditischeap
CreditisavailableCreditishardtoget
-100
-80
-60
-40
-20
0
20
40
60
80
100
-100
-80
-60
-40
-20
0
20
40
60
80
100
13
Q1
12
Q3
12
Q1
11
Q3
11
Q1
10
Q3
10
Q1
09
Q3
09
Q1
08
Q3
08
Q1
07
Q3

3. | 3CFO Survey Q1 2013 Fewer Risks, greater optimism
Investment drivers
This section compares CFO sentiment on nine key drivers of corporate investment today and six months ago.
The big message is that improving macroeconomic and financial conditions are easing the constraints on business
investment.
The radar chart below rates CFO sentiment on a score of zero to ten, with ten the most positive. The blue line
depicts CFOs’ assessment six months ago; the green line shows the current position. CFOs are more positive on
eight out of the nine drivers, thus the green line almost envelops the blue line.
CFOs’ biggest worries, denoted by low absolute scores on the lines, relate to economic uncertainty, the weakness
of the euro area and fiscal consolidation in the UK. But, encouragingly, they are less worried today about weak
growth in Europe and uncertainty than six months ago. Concerns about UK fiscal consolidation have increased,
but only marginally.
CFOs are most optimistic, and increasingly so, about prospects for long-term growth in demand for their own
products and economic activity in emerging markets, the US and the Asia-Pacific region. Sentiment on the cost
and availability of finance has also improved, and CFOs do not see credit conditions exerting a dampening effect
on investment.
Chart 5. Factors affecting corporate investment plans
CFOs’ assessment of the effect of each of the following factors on their investment plans: Q3 2012 (blue line) and Q1 2013 (green line)
Economic
and financial uncertainty
Growth in the euro area
Fiscal consolidation in the UK
Growth in the UK
Cost and availability of external financeAvailability of internal finance
Q3 2012
On a 10-point scale where 0 implies the most negative effect and 10 the most positive.
Growth in emerging
markets
Growth in the US
and Asia-Pacific
Secular or long-term growth
in demand for companies’
products
Q1 2013
1
2
3
4
5
6
7
8
9
10

4. CFO Survey Q1 2013 Fewer Risks, greater optimism4 |
Rising risk appetite
In recent months investors
have increasingly turned to
risk assets, such as equities, in
search of higher returns.
The S&P 500 has gained 10%
this year hitting an all-time
high in the first week of April.
CFOs’ attitudes to risk tend
to mirror those of investors.
Corporate risk appetite rose to
almost a two-year high in the
first quarter.
Companies that derive most
of their revenues from foreign
markets display a significantly
greater appetite for risk than
their UK-facing peers.
Expectations for an increase in
corporate revenues also rose in
the first quarter.
Chart 6. Standard & Poor’s 500 equity index
Source: Thomson Reuters Datastream
600
800
1000
1200
1400
1600
2013201220112010200920082007
Chart 7. Risk appetite
% of CFOs who think this is a good time to take greater risk onto their balance sheets
0
10
20
30
40
50
13
Q1
12
Q3
12
Q1
11
Q3
11
Q1
10
Q3
10
Q1
09
Q3
09
Q1
08
Q3
08
Q1
07
Q3
Chart 8. Outlook for revenue growth
Net % of CFOs who expect UK corporates’ revenues to increase in the next 12 months
IncreaseDecrease
-35
-25
-15
-5
5
15
25
35
45
55
65
13
Q1
12
Q4
12
Q3
12
Q2
12
Q1
11
Q4
11
Q3
11
Q2
11
Q1
10
Q4
10
Q3

5. | 5CFO Survey Q1 2013 Fewer Risks, greater optimism
CFOs are placing less
emphasis on defensive
strategies, such as reducing
costs and increasing cash
flow, than in the previous
quarter.
Nonetheless, cost reduction
and increasing cash flow
remain the top two priorities
for corporates, albeit by
a narrowing margin.
Our index of corporate
defensiveness, having
trended higher for
two-and-a-half years,
has dropped sharply.
Chart 9. 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
Disposing of assets
Increasing capital
expenditure
Reducing leverage
Expanding by
acquisition
Raising dividends
or share buybacks
Introducing new
products/services or
expanding into
new markets
Increasing cash flow
Reducing costs
42%
39%
35%
18%
17%
13%
15%
6%
50%
49%
34%
8%
17%
11%
20%
8%
2013 Q12012 Q4
Chart 10. CFO priorities: Expansionary vs. defensive strategies
Defensive
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.
Expansionary
19%
21%
23%
25%
27%
29%
31%
33%
35%
37%
39%
13
Q1
12
Q4
12
Q3
12
Q2
12
Q1
11
Q4
11
Q3
11
Q2
11
Q1
10
Q4
10
Q3
CFOs less defensive

6. CFO Survey Q1 2013 Fewer Risks, greater optimism6 |
International companies,
those deriving more than
70% of their revenue
from outside the UK, have
decisively shifted from a
defensive to an expansionary
stance.
UK-facing corporates, those
deriving less than 30% of
their revenues from abroad,
remain defensive.
Lower costs and improved
availability of credit have
ensured that raising debt,
through bond issuance or
bank borrowing, remains
the most attractive form of
financing for our panel of
large corporates.
Equity issuance has also
gained favour among CFOs.
CFOs consider equities to be
overvalued for the first time in
three years.
Government bonds continue
to be seen, as they have been
for five years, as the most
overvalued asset.
Chart 11. Index of corporate expansion: International & UK-facing corporates
Difference between the arithmetic averages of the % of CFOs who rated expansionary and
defensive strategies as a strong priority for their business in the next 12 months.
Defensive and expansionary strategies defined under Chart 10.
International
UK-facing
ExpansionaryDefensive
-30%
-20%
-10%
0%
10%
20%
30%
13
Q1
12
Q4
12
Q3
12
Q2
12
Q1
11
Q4
11
Q3
11
Q2
Overseas markets beckon
Chart 12. Favoured source of corporate funding
Net % of CFOs reporting the following sources of funding as attractive
Bond
issuance
Bank
borrowing
Equity
issuance
AttractiveUnattractive
-60
-40
-20
0
20
40
60
80
13
Q1
12
Q3
12
Q1
11
Q3
11
Q1
10
Q3
10
Q1
09
Q3
09
Q1
08
Q3
08
Q1
07
Q3
Chart 13. UK valuations
Net % of respondents who think the following assets are overvalued
Government bonds
Commercial
real estate
Equities
OvervaluedUndervalued
-80
-60
-40
-20
0
20
40
60
80
100
13
Q1
12
Q3
12
Q1
11
Q3
11
Q1
10
Q3
10
Q1
09
Q3
09
Q1
08
Q3
08
Q1
07
Q3

7. | 7CFO Survey Q1 2013 Fewer Risks, greater optimism
Economic and financial context
The macroeconomic backdrop to the Deloitte CFO Survey Q1 2013
Economic activity in the UK and the euro area appears to have stagnated in the first quarter and growth forecasts
for 2013 have drifted lower. However, the British Chambers of Commerce reported a rise in optimism among small
UK companies. Market nerves about the US deficit eased and US housing and employment activity improved.
The outlook for growth in emerging markets improved as fears of a ‘hard landing’ eased. The bold monetary
and fiscal stimulus policies introduced by Japan’s new government led to a strong rally in Japanese equities and
boosted confidence about Japan’s growth prospects. Financial markets continued to strengthen, with the UK
FTSE 100 up 8.7% between January and the end of March, and the S&P 500 and Dow Jones Industrial Average
reaching all-time highs. Financial market optimism was only briefly dented by the €17 billion bailout of Cypriot
banks. The episode set new precedents with private depositors being forced to contribute to the rescue and the
imposition of capital controls.
UK GDP growth: Actual and forecast (%)
-8
-6
-4
-2
0
2
4
6
2013201220112010200920082007
UK growth to see
weak recovery
Quarter-on-quarter
growth
Forecasts
Year-on-year
growth
Source: ONS, consensus forecasts from The Economist and
Deloitte calculations
UK private and public sector job growth (thousands)
Source: ONS
Private sector hiring
offsets public sector
job losses
Private sector
-300
-200
-100
0
100
200
300
400
500
12
Q4
12
Q1
11
Q1
10
Q1
09
Q1
08
Q1
07
Q1
Public sector
VIX Index – a measure of equity market volatility
0
10
20
30
40
50
60
70
80
90
2013201220112010200920082007
Financial stress
has eased
Source: ONS, consensus forecasts from The Economist and
Deloitte calculations
Greaterfinancialstress
UK annual CPI inflation (%)
0
1
2
3
4
5
6
7
8
9
121008060402009896949290
UK consumer price inflation
has edged up recently
Source: ONS

8. CFO Survey Q1 2013 Fewer Risks, greater optimism8 |
Two-chart summary of key survey messages
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About the survey
This is the 23rd
quarterly survey of Chief Financial Officers and Group Finance Directors of major companies in the UK.
The 2013 first quarter survey took place between 14th
and 28th
March. 120 CFOs participated, including the CFOs
of 26 FTSE 100 and 44 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 69 UK-listed companies
surveyed is £671 billion, or approximately 32% of the UK quoted equity market.
The Deloitte CFO Survey is 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
Please visit www.deloitte.co.uk/cfosurvey for current and past copies of the survey, historical data and coverage
of the survey in the media and elsewhere.
Uncertainty
% of CFOs who rate the level of external financial and economic
uncertainty facing their business as above normal, high or very high
Sharp fall in uncertainty
72
77
82
87
92
97
13
Q1
12
Q4
12
Q3
12
Q2
12
Q1
11
Q4
11
Q3
11
Q2
11
Q1
10
Q4
10
Q3
CFO priorities: Expansionary vs. defensive strategies
Defensive
CFOs less defensive
Arithmetic average of the % of CFOs who rated expansionary and defensive
strategies as a strong priority for their business in the next 12 months.
See page 5 for definitions of expansionary and defensive strategies.
Expansionary
19%
21%
23%
25%
27%
29%
31%
33%
35%
37%
39%
13
Q1
12
Q4
12
Q3
12
Q2
12
Q1
11
Q4
11
Q3
11
Q2
11
Q1
10
Q4
10
Q3