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CFOs 'vindicated' on cautious approach to investment

Michelle Perry | April 26, 2012
Britain's chief financial officers are likely to feel vindicated on Wednesday for their caution in holding back on investing in the UK ahead of gaining a clearer picture of what the economy has in store as the UK economy faces a double dip

Britain's chief financial officers are likely to feel vindicated on Wednesday for their caution in holding back on investing in the UK ahead of gaining a clearer picture of what the economy has in store as the UK economy faces a double dip

The Office for National Statistics on Wednesday revealed the UK had entered its second recession since the financial crisis in 2007 as figures showed the UK economy contracted 0.2 percent in the first three months of 2012.

The contraction marks the second consecutive quarter of declining growth after the economy shrank by 0.3 percent in the fourth quarter of 2011, which defines a technical recession.

In January a majority of CFOs expected Britain to suffer a 'double dip', up from just 27 percent a year ago, according to a quarterly CFO survey from Deloitte.

This month the latest data from Deloitte showed that although confidence among Britain's top finance chiefs was at the highest levels since 2010, CFOs remained cautious about committing any serious investment.

"The materialisation of a double dip recession, albeit one likely to last just two quarters, is likely to be seen as vindicating a cautious stance on the part of corporate," Ian Stewart, Deloitte's chief economist, said.

"Corporate cash reserves remain at near record levels and one interpretation is that relatively high levels of cash represent an insurance policy against a volatile environment. Having been wrong footed by a weakening of the economy last year UK businesses may demand greater certainty and more evidence that recovery is on track before they are willing to raise capital spending," Stewart added.

 

 

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