Deloitte European CFO Survey Spring 2022: Cloudy economic climate in Europe

Most chief financial officers of companies in Europe are particularly worried, as reflected in this year’s edition of Deloitte’s European CFO Survey. Data for this biannual survey was collected between March and April 2022, capturing the views of 1,319 CFOs from 18 European countries, including Greece, across a wide range of industries.

The survey reveals that the invasion of Ukraine caused a sharp shock to the business climate that was previously recovering from the anti-pandemic measures. CFOs now report a record level of risk, stemming from geopolitics and inflation. The findings indicate that following the outbreak of war and its economic impact there is a strong climate of pessimism and uncertainty for the vast majority of CFOs, with almost half of respondents not expecting an immediate improvement in the overall financial picture. The drop in optimism is much more pronounced in European countries. According to the survey, Spain recorded the highest percentage of pessimism (66%), while in Greece 53% of CFOs declared pessimism about the financial prospects of their companies.

At the same time, the results of the survey showed that the most pessimistic are the CFOs active in the automotive industry, mainly because their sector is facing serious shortages of raw materials, due to the war in Ukraine.

On the other hand, the majority of CFOs in the tourism sector, specifically 55% of them, feel optimistic about the future of tourism.

Optimistic sentiment regarding capital spending and hiring

Despite the worsening economic outlook compared to previous surveys, CFOs remain optimistic about revenue rates, capital spending and hiring numbers. However, due to the volatile economic climate that prevails, the majority of CFOs predict a sharp deterioration in operating margins.

CFOs who are active in consumer goods companies as well as in the automotive industry are presented as the most pessimistic, as they have to survive in a climate of strong uncertainty where supply chain disruptions combined with ever-increasing costs as well as labor shortages, plague their industries of employment.

However, the survey showed that a large number of CFOs, from across the spectrum of industries (excluding automotive), appear quite optimistic (49% in Greece) about hiring growth over the next 12 months.

Inflation will continue to rise

The situation in Ukraine, among other things, has caused an unprecedented inflationary crisis by modern standards. CFOs predict that continued inflation is a real threat to the future of business, as according to the survey, they see the inflation rate rising from 2.7% in autumn 2021 to 5.9% in spring 2022 .

Climate of high uncertainty

Levels of economic and business uncertainty are higher than ever, with 77% of CFOs feeling that the current volatile and uncertain climate has greatly affected their businesses.

In contrast, in the tourism and travel industry there is a climate of composed optimism as the CFOs of tourism and travel companies believe that uncertainty has decreased in the spring of 2022 to 66% compared to 77%, where it was in the fall of 2021. However, it is worth noting that overall the 80% of European CFOs view with distrust the taking of new risks through investments for their businesses, while 15 of the 18 countries that participated in the survey consider that geopolitical developments are currently a determining factor for the future of businesses.

Major supply chain disruptions

European CFOs report severe problems and disruptions in the supply chain, as raw material prices and transportation costs skyrocket, and unpredictable fluctuations in supply and demand seen after the outbreak of the pandemic and during unexpected geopolitical developments did not help to normalize the situation.

The problem is now felt, as 2 out of 3 European CFOs, i.e. 66%, feel that the companies they work for have been affected on a large scale.

The research findings show that of the supply chain disruptions, the automotive sector has been most affected (98%), followed by the products and services industry (80%) and finally by the retail sector. which has been affected in 78%.

The image of CFOs in Greece

– 53% of Greek CFOs feel less optimistic and 31% more about their company’s financial prospects, compared to three months ago.

– 76% assess the level of external financial and economic uncertainty as high.

– 80% don’t think it’s the right time to take on more risk on their balance sheet.

– 64% believe that their income will increase in the next 12 months while 22% that it will decrease.

– 49% expect their headcount to increase over the next 12 months.

– They expect the inflation rate (for the Consumer Price Index) in the next 12 months to be 6.8% for Greece and 5.59% for the Eurozone.

– 66% see higher transport costs as the main problem facing the supply chain, while 59% see higher commodity/intermediate prices as the main problem.

– 41% report that their companies are moderately affected by

supply chain problems and only 11% that they are highly affected.

Commenting on the findings of the recent Deloitte European CFO Survey Spring 2022, Mr. Panagiotis Hormovitis, Partner, Financial Advisory, CFO Program Leader, Deloitte noted: “Businesses now, in the midst of successive, symmetrical and unprecedented crises of the European and global economy, are again called upon to adapt to a demanding reality, demonstrating flexibility and

strong reflexes, devising a strategy that will take into account geopolitical upheavals and inflationary pressures (with all that entails) but at the same time will increasingly rely on digital transformation and incorporate ESG criteria and actions against climate change. It is perhaps one of the most challenging circumstances in decades that we see affecting business leaders, who appear more pessimistic than they have been in the last 7 years as they face an external and dangerous countervailing factor, the outbreak of the most serious war in Europe after World War II. With inflation increasing and the problems in

supply chain to remain, the prospects for investment and development are diminishing and only the end of the war and its effects will once again give a clearer and more optimistic picture to everyone. However, it is of particular and symbolic importance that Greek CFOs have already faced crises and their consequences for a long time in our recent past. That alone makes me more optimistic.”