Find out more at http://www.deloitte.co.uk/cfosurvey Policy change has emerged as the biggest concern for chief financial officers, ahead of economic uncertainty. - Policy change is biggest concern for CFOs. - Perceptions of economic and financial uncertainty have hit a four-year low. - CFO appetite for risk remains high as corporates shift from balance sheet repair to growth. - 51% of CFOs expect interest rates to be equal to or above 1.0% in a year’s time. This is the 28th quarterly survey of chief financial officers and group finance directors of major companies in the UK. The Q2 2014 survey took place between 6th and 23rd June. 112 CFOs participated, including the CFOs of 31 FTSE 100 and 37 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 68 UK-listed companies surveyed is £473 billion, or approximately 21% 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.

1. Political risk has eclipsed worries about the economy
as a concern for the Chief Financial Officers of the
UK’s largest companies. CFOs rank next May’s general
election and the possibility of a referendum on EU
membership as greater risks for their businesses than
higher interest rates, bubbles in housing or financial
markets, or weakness in emerging markets or the
euro area.
Such views contrast with CFO beliefs that levels of
economic and financial risk have fallen sharply in the last
year and with lower readings on news-based measures
of policy uncertainty. CFOs are increasingly shifting away
from a focus on balance-sheet repair towards growth.
Growth is the top balance-sheet priority for UK corporates
and 65% of CFOs say now is a good time to take risk.
Expectations for capital spending, hiring and discretionary
spending have risen strongly in the last year.
The weight CFOs attach to defensive strategies,
including cost control, fell to a four-year low in the
second quarter.
This sort of positive sentiment is increasingly being
reflected in the official data. Hiring by the private
sector has risen by 3.2% in the last year and business
investment has risen by 10.6%. In May corporate
bank borrowing saw the first year-on-year increase
in five years.
Q2 2014
Political risk and corporate expansion
The Deloitte CFO Survey
July 2014

2. Chart 1. Risk to business posed by the following factors
Weighted average ratings on a scale of 0 – 100 where 0 stands for no risk and 100 stands
for the highest possible risk
Scotland's referedum on independence
on 18th September
A bubble in housing and/or other real and financial
assets and the risk of higher inflation
Deflation and economic weakness in the euro area,
and the possibility of a renewed euro crisis
Weakness and or volatility in emerging markets
The prospect of higher interest rates and a general
tightening of monetary conditions in the UK and US
A future UK referendum on membership
of the European Union
The May 2015 UK general election and the risk
of policy change and uncertainty
55
50
46
45
44
39
38
The Deloitte CFO Survey

3. The message from the CFO Survey is that corporates
are prioritising expansion over further strengthening
of their balance sheets. Against a backdrop of easy
credit and high risk appetite companies are upbeat
on revenues and margins. Economic and financial risk
has declined significantly in the last year. But with the
general election less than a year away uncertainties
around policy risk have moved centre stage.
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
To access current and past copies
of the survey, historical data and
media coverage, please visit:
www.deloitte.co.uk/cfosurvey
The Deloitte CFO Survey

4. CFO perceptions of economic uncertainty have
continued to fall.
49% of CFOs now rate the level of financial and economic
uncertainty facing their business as above normal, high or
very high – the lowest reading in four years.
Chart 2. Uncertainty
% of CFOs who rate the level of external financial and economic uncertainty facing their business as above normal, high or
very high
45%
55%
65%
75%
85%
95%
2014
Q2
2014
Q1
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
2010
Q3
Declining uncertainty

5. This fits with the dramatic fall in uncertainty over economic policy during the last two years, as measured by this
news-based index of uncertainty.
Chart 3. Economic policy uncertainty
News-based index of economic policy uncertainty
Source: Policyuncertainty.com
The Economic Policy Uncertainty index, developed by academics at Stanford University and the University of Chicago,
measures the share of articles containing terms related to economic policy uncertainty in the overall UK newsflow
0
50
100
150
200
250
300
350
400
450
1997 1998 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Declining uncertainty

6. Fears of a euro break-up have also subsided. CFOs now assign a 7% probability to the euro area
breaking up in the next 12 months – the lowest reading
since the euro crisis began in 2011.
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
37%
26%
36%
27%
22%
18%
9% 8%
10% 9%
7%
0%
5%
10%
15%
20%
25%
30%
35%
40%
2014
Q2
2014
Q1
2013
Q4
2013
Q3
2013
Q2
2013
Q1
2012
Q4
2012
Q3
2012
Q2
2012
Q1
2011
Q4
Declining uncertainty

7. The decline in economic and financial uncertainty has
coincided with a surge in corporate appetite for risk.
65% of CFOs say that now is a good time to take risk,
down only slightly from the record reading of 71% in the
first quarter.
0%
10%
20%
30%
40%
50%
60%
70%
80%
2014
Q1
2013
Q3
2013
Q1
2012
Q3
2012
Q1
2011
Q3
2011
Q1
2010
Q3
2010
Q1
2009
Q3
2009
Q1
2008
Q3
2008
Q1
2007
Q3
Chart 5. Risk appetite
% of CFOs who think this is a good time to taker greater risk onto their balance sheets
Profitability to rise

8. Corporates are also more optimistic about their
profitability.
CFO expectations of a rise in revenues and operating
margins have hit four-year highs.
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
2014
Q2
2014
Q1
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
2010
Q3
DecreaseIncrease
Revenues
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
Operating margins
Profitability to rise

9. -70%
-50%
-30%
-10%
10%
30%
50%
70%
2014
Q2
2013
Q3
2012
Q4
2012
Q1
2011
Q2
2010
Q3
2009
Q4
2009
Q1
2008
Q2
2007
Q3
LessoptimisticMoreoptimistic
Chart 7. Business confidence
Net % of CFOs who are more optimistic about financial prospects for their company now than three months ago
CFO optimism has eased slightly in the second quarter but continues to run well above its long-term average.
Profitability to rise

10. -100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
2014
Q2
2013
Q4
2013
Q2
2012
Q4
2012
Q2
2011
Q4
2011
Q2
2010
Q4
2010
Q2
2009
Q4
2009
Q2
2008
Q4
2008
Q2
2007
Q4
CreditischeapCreditiscostly
CreditishardtogetCreditisavailable
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
Cost of credit (LHS)
Chart 8. Cost and availability of credit
Net % of CFOs reporting credit is costly and credit is easily available
Availability of credit
(RHS)
Financing conditions remain benign for the large
corporates on our survey panel.
CFOs report that the cost of credit has fallen to a seven-
year low in the second quarter while credit availability is
close to the highest level in seven years.
Easy credit

11. -4
-3
-2
-1
0
1
2
3
4
5
6
FinancialdeficitFinancialsurplus
Chart 9. Financial balance of corporate sector
Financial balance of UK private non-financial corporations as a % of GDP
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
In the aftermath of the financial crisis, corporates paid
down debt, cut costs and held on to cash, realising a
huge financial surplus.
Reflecting greater confidence on the strength of their
balance sheets, corporates have narrowed this surplus
during the last two years.
Easy credit

12. Bank lending to corporates rose by 1% in the year to
May, the first increase in five years.
The Bank of England’s Credit Conditions Survey
reveals that mergers and acquisitions, investment into
commercial real estate and capital expenditure have
been major drivers of corporate demand for loans.
-70%
-50%
-30%
-10%
10%
30%
2014
Q2
2013
Q3
2012
Q4
2012
Q1
2011
Q2
2010
Q3
2009
Q4
2009
Q1
2008
Q2
2007
Q3
Capital
expenditure
Commercial
real estate
Source: Bank of England’s Credit Conditions Survey
M&A
Chart 10. Factors supporting demand for loans from corporates
Net % of banks reporting each of the following factors as a contributor to changes in corporate demand for lending over
the past three months (2Q moving average)
Easy credit

13. The top priority for UK CFOs is introducing new
products and services or expanding into new
markets.
Compared to a year ago, there has been a
marked softening of their focus on defensive
strategies such as reducing costs and increasing
cash flow.
CFOs are placing greater emphasis on
expansionary strategies such as increasing
capital expenditure and expanding by
acquisition.
0% 10% 20% 30% 40%
Reducing leverage
Raising dividends or share
buybacks
Disposing of assets
Increasing capital
expenditure
Expanding by acquisition
Increasing cash flow
Reducing costs
Introducing new products/
services or expanding into
new markets
2014 Q2
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
2013 Q2
34%
34%
26%
40%
25%
15%
14%
5%
10%
18%
9%
8%
12%
13%
21%
38%
26%
Focus on expansion

14. Corporate defensiveness hit a four-year low in
the second quarter of 2014.
CFOs have rated expansioary balance-sheet
strategies as a higher priority than defensive
ones for the fourth consecutive quarter.
19%
21%
23%
25%
27%
29%
31%
33%
35%
37%
39%
2014
Q1
2013
Q3
2013
Q1
2012
Q3
2012
Q1
2011
Q3
2011
Q1
2010
Q3
Defensive strategies
Chart 12. CFO priorities: Expansionary vs. defensive strategies
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 strategies
Focus on expansion

15. CFO expectations for growth in discretionary spending
have hit a four-year high.
Expectations for growth in hiring and capital expenditure
are close to their highest levels in four years.
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
2014
Q2
2014
Q1
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
2010
Q3
DecreaseIncrease
Capital
expenditure
Chart 13. Outlook for hiring, capital expenditure and discretionary spending
Net % of CFOs who expect UK corporates’ hiring, capital expenditure and discretionary spending to increase over the next
12 months
Hiring
Discretionary
spending
Investment on the rise

16. Official data shows that investment is outpacing GDP growth. Business investment has risen by 10.6% over the last year.
-25
-20
-15
-10
-5
0
5
10
15
20
Business investment
Chart 14. GDP growth and business investment
UK GDP growth (% YoY) and growth in business investment (% YoY, 2Q moving average)
GDP
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Investment on the rise

17. In his Mansion House speech on 12th June, the Governor
of the Bank of England warned that UK interest rates could
rise sooner than widely expected.
CFOs have taken this message on board. On average our
panel sees base rates rising to around the 0.9% mark in
a year’s time, amounting to roughly two 25-basis-point
rises by June 2015.
0%
10%
20%
30%
40%
50%
1.25%1%0.75%0.50%
43%
45%
20%
40%
75%
20%
36%
9%
1%
6%
Chart 15. Bank rate expectations
% of CFOs who expect the Bank of England’s base rate to be at the following levels in a year’s time
2014 Q1 2014 Q12
Investment on the rise

18. The macroeconomic backdrop to the Deloitte
CFO Survey Q2 2014
Global equity markets rose 4.2% in the second quarter
and yields on US and German bonds fell. Growth
forecasts for emerging economies edged lower on a
mix of geopolitical, financial and economic concerns.
The US economy shrank in the first quarter, although
the effects of an unusually harsh winter and business
inventory restocking appear to be temporary. Portugal
exited its bailout programme and Greece successfully
raised money in the markets but concerns about
deflation and low growth prompted the European
Central Bank to cut interest rates. In the UK, inflation
softened and output rose by 3.1% in the year to
Q1 2014, the strongest performance in the developed
world. In his Mansion House speech the Governor of
the Bank of England claimed that a rise in UK interest
rates could “happen sooner than markets currently
expect”, although Mr. Carney subsequently sought to
play down expectations of an early rate rise.
CFO Survey: Economic and financial context

19. Quarter-on-quarter
growth
Year-on-year
growth
201520142013201220112010200920082007
-8
-6
-4
-2
0
2
4
6
Forecasts
UK GDP growth: Actual and forecast (%)
Source: ONS, consensus forecasts from The Economist and Deloitte calculations
UK forecast to grow
by 3% in 2014
CFO Survey: Economic and financial context

20. CFO Survey: Economic and financial context
Financial stress on this
measure at 7-year low
0
10
20
30
40
50
60
70
80
90
Greaterfinancialstress
VIX Index – a measure of equity market volatility
Source: Thomson Reuters Datastream
2007 2008 2009 2010 2011 2012 2013 2014

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

22. Inflation at four-year low
0
1
2
3
4
5
6
7
8
9
UK annual CPI inflation (%)
Source: ONS
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
CFO Survey: Economic and financial context

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
45%
55%
65%
75%
85%
95%
2014
Q2
2013
Q3
2012
Q4
2012
Q1
2011
Q2
2010
Q3
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
2014
Q2
2013
Q3
2012
Q4
2012
Q1
2011
Q2
2010
Q3
DecreaseIncrease
Capital
expenditure
Outlook for hiring, capital expenditure and discretionary
spending
Net % of CFOs who expect UK corporates’ hiring, capital
expenditure and discretionary spending to increase over the
next 12 months
Hiring
Discretionary
spending

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About the survey
This is the 28th
quarterly survey of Chief Financial Officers and Group Finance Directors of
major companies in the UK. The 2014 second quarter survey took place between 6th
and
23rd
June. 112 CFOs participated, including the CFOs of 31 FTSE 100 and 37 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
68 UK-listed companies surveyed is £473 billion, or approximately 21% 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 Linda Elston on 020 7303 0526 or
email lelston@deloitte.co.uk