Risk appetite among UK CFOs rose to a six-and-a-half year high in Q1 2014 as economic uncertainty fell and financing conditions improved. 71% said it was a good time for risk-taking, up from 33% a year ago. CFOs expect increased corporate spending, bank borrowing, and equity issuance. Priorities include expanding markets and increasing cash flow rather than defensive strategies. Growth prospects were seen as strongest for the UK and US, while emerging markets weakened. Most CFOs foresee UK interest rates rising slightly in the next year.

1. Risk appetite among the Chief Financial Officers of the
UK’s largest companies rose to a six-and-a-half-year high
in the first quarter of 2014. 71% of CFOs say now is a
good time to take risk onto their balance sheet, more
than twice the level of a year ago and higher than the
levels prevailing before the onset of the financial crisis in
late 2007.
Significantly reduced economic uncertainty and much
improved financing conditions have helped drive
corporate risk appetite higher.
Our economic and financial uncertainty index has fallen
by one-third over the last year. Easy monetary policy and
favourable financing conditions have created a capital-
rich environment for big UK corporates. Buoyant risk
appetite means that CFOs are likely to draw down on
that capital. CFOs report that credit is more available,
and more keenly priced, than at any time in the last six-
and-a-half years. Expectations for equity issuance and
bank borrowing have seen a strong recovery since the
lows in late 2011.
The default position of large corporates in the past
six years – bullish on emerging markets, cautious on
developed markets – seems to be reversing.
Q1 2014
Record risk appetite
The Deloitte CFO Survey
April 2014

2. 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 1. Risk appetite
% of CFOs who think this is a good time to take greater risk onto their balance sheets
The Deloitte CFO Survey

3. CFOs have become more confident about growth
in developed economies, particularly the UK.
CFOs increasingly see growth here in the UK, and
established markets such as the US and euro area, as
the key drivers of their corporate investment plans.
Plans for all forms of corporate spending – hiring,
capital spending and discretionary spending – are
at new three-and-a-half-year highs. A record 95%
of CFOs expect merger and acquisition activity to
rise over the next year. ome markedly more confident
about the outlook for UK inflation. Last quarter a
majority expected inflation to overshoot significantly
its 2.0% target in two years’ time. Most now expect
inflation to be around 2.0%. On average CFOs expect
interest rates to rise by 0.25% over the next year.
Consumer spending has been a significant driver of
the UK recovery so far. This quarter’s CFO Survey
suggests that corporate spending will play an
increasingly prominent role as the recovery matures.
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. Economists have become increasingly optimistic about
the UK’s growth prospects.
Among major advanced economies, the UK has seen the
biggest upgrade to 2014 growth forecasts.
1.2
1.5
1.8
2.1
2.4
2.7
3.0
Mar-
14
Feb-
14
Jan-
14
Dec-
13
Nov-
13
Oct-
13
Sep-
13
Aug-
13
Jul-
13
Jun-
13
May-
13
Apr-
13
Mar-
13
Chart 2. Evolution of 2014 consensus growth forecasts for UK (% YoY)
Source: The Economist
Greater risk appetite

5. This is reflected in CFOs’ perceptions of uncertainty
which have continued to fall.
52% of CFOs rate the level of economic and financial
uncertainty facing their businesses as above normal,
high or very high, down from 77% a year ago.
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
45%
55%
65%
75%
85%
95%
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
Greater risk appetite

6. CFO optimism has edged slightly lower this quarter but
remains close to its highest level in four years.
-70%
-50%
-30%
-10%
10%
30%
50%
70%
2014
Q1
2013
Q3
2012
Q4
2012
Q1
2011
Q2
2010
Q3
2009
Q4
2009
Q1
2008
Q2
2007
Q3
LessoptimisticMoreoptimistic
Chart 4. Business confidence
Net % of CFOs who are more optimistic about financial prospects for their company now than three months ago
Greater risk appetite

7. Financing conditions have continued to improve for
the large corporates on our survey panel.
CFOs report credit as being cheaper and more easily
available than at any time in the last six-and-a-half years.
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
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
CreditischeapCreditiscostly
CreditishardtogetCreditisavailable
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
Cost of credit (LHS)
Chart 5. Cost and availability of credit
Net % of CFOs reporting credit is costly and credit is easily available
Availability of credit
(RHS)
Easy finance

8. The balance of opinion among CFOs is that UK corporate
balance sheets are underleveraged.
-40%
-20%
0%
20%
40%
60%
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
UnderleveragedOverleveraged
Chart 6. Attitudes to leverage
Net % of CFOs who think UK corporate balance sheets are overleveraged
Easy finance

9. -35%
-15%
5%
25%
45%
65%
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
Equity issuanceBank
borrowing
Bond issuance
Chart 7. 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
Easy finance
This, along with easy financing conditions, has led to a
sharp rise in CFO expectations of bank borrowing by UK
corporates over the last year.
CFOs are also very positive on increased equity issuance.
For the first time in three years, a greater proportion
of panellists expect equity issuance to rise in the next
12 months than those expecting a rise in bond issuance
or bank borrowing.

10. 0% 10% 20% 30% 40% 50%
Disposing of assets
Reducing leverage
Raising dividends or
share buybacks
Increasing capital
expenditure
Expanding by acquisition
Reducing costs
Increasing cash flow
Introducing newproducts/
services or expanding
into new markets
2014 Q1
Chart 8. 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 Q1
38%
39%
34%
42%
23%
21%
15%
10%
18%
7%
7%
6%
13%
17%
35%
38%
Focus on expansion
The top priorities for CFOs are introducing
new products/services or expanding into new
markets and increasing cash flow.
CFOs are placing greater emphasis on
expansionary strategies such as expanding by
acquisition and increasing capital expenditure
than they did a year ago.
They have also softened their focus on defensive
strategies such as reducing costs and leverage.

11. 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 9. 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
Compared to last quarter, corporate defensiveness has
edged higher as CFOs keep a closer eye on cash.
Yet, on balance, corporates continue to focus on
expansion.
Focus on expansion

12. CFO expectations for hiring, capital expenditure
and discretionary spending have hit new
three‑and‑a‑half‑year highs this quarter.
This fits with the 8.7% year-on-year rise in business
investment in the fourth quarter of last year.
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
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 10. 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 to rise

13. Chart 11 compares the effect of nine key
factors on corporate investment plans between
Q3 2014 and now.
CFOs report that all these factors have had
a more positive effect on their investment
plans over the period. Uncertainty and fiscal
consolidation remain the greatest constraints on
investment although their dampening effects
have weakened. The biggest improvements
have come from prospects for growth in the
UK and euro area. In fact, CFOs report that
growth in the UK now offers greater support to
their investment plans than growth in emerging
markets.
They also continue to be most optimistic on
prospects for long‑term growth in demand for
their products and services.
Chart 11. Factors affecting corporate investment plans
CFOs’ assessment of the effect of each of the following factors
on their investment plans
On a 10-point scale where 0 implies the most negative effect and
10 the most positive
Q3 2013 Q1 2014
0
1
2
3
4
5
6
7
8
9
10
Uncertainty about
the economic and
financial environment
Fiscal consolidation
in the UK(tax rises,
cuts in public
spending)
Actual or
expected
levels of
economic
activity/GDP
growth in
the euro area
Availability of
internal finance
Cost and
availability
of external
finance
Actual or expected
levels of economic
activity/GDP growth
in emerging markets
Actual or expected
levels of economic
activity/GDP growth
in the rest of the world
(including the US,
Japan and Asia-Pacific)
Actual or
expected
levels of
economic
activity/GDP
growth
in the UK
Secular or long-term
growth for your
products or services
Investment to rise

14. CFOs report an improvement in prospects
for economic activity across the developed
world. They are especially positive on growth
in the UK and US, which are forecast to be the
fastest‑growing G7 nations this year.
By contrast, prospects for growth in emerging
economies have deteriorated.
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
Emerging
markets and
developing
economies
JapanEuro areaUSUK
95%
70%
54%
34%
-52%
Chart 12. Prospects for economic activity
Net % of CFOs reporting an improvement in prospects for economic
activity over the last six months in the UK, US, euro area, Japan and
emerging markets
Improved UK growth prospects

15. A majority of CFOs expect the Bank of England’s
base rate to be above its current level of 0.5% in
a year’s time.
The weighted‑average interest rate expected
by our panel is 0.71% which amounts roughly
to a 25-basis-point rise by the first quarter of
next year.
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1.25%1%0.75%0.50%
36%
43%
20%
1%
Chart 13. 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
Improved UK growth prospects

16. With inflation down from last year’s peak of
2.9% in June to just 1.7% in February, CFOs
have lowered their inflation expectations.
Three‑quarters expect CPI inflation to hover
around the Bank of England’s 2.0% target in
two years’ time. Only a fifth of our panellists
expect inflation to be significantly above target,
down from a majority last quarter.
Improved UK growth prospects
0%
10%
20%
30%
40%
50%
60%
70%
80%
Above
3.5%
2.5%-
3.5%
1.5%-
2.5%
0-
1.5%
Below
zero
2%
48%
45%
75%
20%
0% 0% 0%5%5%
Chart 14. Inflation expectations
% of CFOs who expect consumer price inflation in the UK to be
within the following ranges in two years’ time
2013 Q4 2014 Q1

17. The macroeconomic backdrop to the Deloitte
CFO Survey Q1 2014
The underlying pace of growth in major advanced
economies improved in the first quarter. UK data were
particularly strong, with further upgrades to growth
forecasts and inflation falling below the Bank of
England’s 2.0% target for the first time in more than
four years. The recovery in the euro area broadened,
with some gains in the peripheral economies that
bore the brunt of the euro crisis. Fears of deflation
in the euro area led to the president of the German
Bundesbank to soften his stance on further monetary
easing in the region.
Events in Crimea and further downgrades to emerging
market growth forecasts added to concerns about
emerging market economies. Equities were volatile.
Developed markets saw the largest gains with emerging
market and UK equities lagging behind. Appetite for
deal-making rose, with a number of large transactions
driving the value of global M&A activity up by 54% in
Q1 on a year earlier, while global initial public offerings
almost doubled in value.
CFO Survey: Economic and financial context

18. 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 expected to grow
by 2.8% in 2014
CFO Survey: Economic and financial context

19. CFO Survey: Economic and financial context
Financial stress
remains 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

20. Private sector hiring offsets
public sector job losses
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

21. Inflation down to 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

22. Two-chart summary of key survey messages
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
Emerging
markets and
developing
economies
JapanEuro
area
USUK
95%
70%
54%
34%
-52%
Prospects for economic activity
Net % of CFOs reporting an improvement in prospects for
economic activity over the last six months in the UK, US, euro
area, Japan and emerging markets
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
14
Q1
13
Q4
13
Q3
13
Q2
13
Q1
12
Q4
12
Q3
12
Q2
12
Q1
11
Q4
11
Q3
11
Q2
11
Q1
10
Q4
10
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 27th quarterly survey of Chief Financial Officers and Group Finance Directors
of major companies in the UK. The 2014 first quarter survey took place between
6th and 24th March. 126 CFOs participated, including the CFOs of 27 FTSE 100 and
45 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 81 UK‑listed companies surveyed is £570 billion, or approximately 26% 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