Many businesses have been keeping schtum on the in/out debate (some more forcefully than others), for fear of being too political. But the upcoming EU referendum is playing on everyone’s minds, according to Deloitte’s survey of 120 FTSE 350 CFOs.
The execs ranked it as the biggest risk facing businesses, ahead of economic weakness in the eurozone, weak demand in the UK and the prospect of higher interest rates. That’s probably partly because the Brexit campaign has been picking up steam and the outcome of the referendum seems increasingly tricky to predict, even if the 'in' supporters currently have the edge.
Nobody quite knows what a British exit from the EU would actually mean, particularly in terms of changing rules and regulations, so firms would be dealing with a great deal of unchartered territory if Britain's voters decide to head for the door.
Uncertainty can be a big burden for companies and even just the prospect of the referendum on the horizon has put the brakes on much business activity. David Sproul, senior partner and CEO of Deloitte, said, ‘We are already seeing the unsettling effect of the referendum on business sentiment.’ There has, he said, been ‘a marked slowdown in M&A activity as businesses put plans on hold for now’.
Some 83% of CFOs said the level of uncertainty facing their firm was above normal, high or very high – which was up from 64% in the Q4 equivalent survey. Even so, just over a quarter said their companies were making contingency plans. Over half were either confident of Britain remaining in the EU (or perhaps can’t yet bear the thought of having to prepare for a Brexit) as they said they hadn’t made any plans.
Despite relatively few firms taking vocal public stances, surveys such as this one suggest many execs are keener to stay in the EU than they might be letting on. The CFOs listed boosting UK exports, attracting foreign direct investment and developing the UK’s influence and connections globally as big benefits for continuing EU membership. Three quarters said they favour staying in the EU, and just 8% said they wanted to leave.
So while the outward appearance may be careful indifference, it seems underneath the surface businesses are beginning to sweat as June 23 draws closer.