Big companies are shifting towards expansion, with expectations for hiring and investment rising to their highest level for three years.
A quarterly survey of finance directors by Deloitte, the professional services firm, gives hope that business investment may finally start to pick up as the UK’s economic recovery gathers pace.
Business investment has been one of the main missing elements in the recovery so far. It fell by 2.7 per cent in the second quarter, according to official data, and remains 27 per cent below its pre-recession peak.
For the first time since 2011, expansion is a higher priority for chief financial officers than cutting costs and building up cash, Deloitte said.
Optimism about their company’s financial prospects was close to a three-year high. Deloitte surveyed 116 CFOs in September, including 28 from the FTSE 100 and 42 from the FTSE 250.
More than four-fifths said they expected UK interest rates to rise by 2015. They were sceptical that the forward guidance framework introduced by Mark Carney, Bank of England governor, will keep interest rates on hold well into 2016 as the Bank suggests.
Four out of 10 said introducing products and services or expanding into new markets were a strong priority in the coming 12 months.
Only 29 per cent said reducing costs was a strong priority, with 35 per cent saying the same about increasing cash flow, down from a peak of 49 per cent in late 2012.
Some 54 per cent of CFOs said now was a good time to take risk on their balance sheets, up from 45 per cent in the last quarter and the highest level recorded in six years.
The proportion saying their business faced a high level of financial and economic uncertainty was 62 per cent, down from a high of 97 per cent in 2011. CFOs saw just an 8 per cent probability of a country leaving the euro, down from 37 per cent two years ago.
Finance chiefs expect growth in the UK and euro area to provide a boost to their investment plans. They cited growth in the UK as one of the main factors supporting investment in the coming 12 months, ahead of growth in emerging markets or in the US and Asia.
Ian Stewart, chief economist at Deloitte, said a “new mood of confidence” pervaded the survey, with finance chiefs seeing fewer risks in the global economy and greater opportunities for expansion.
“The defensive strategies of cost cutting and cash accumulation that saw corporates through the global financial crisis are increasingly out of favour. The priority now is expansion and the balance-sheet cycle has turned decisively towards growth,” he said.
Mr Stewart added: “CFOs have become markedly more positive on prospects for growth in the developed world. There’s greater confidence too, that the euro will hold together.”
He said emerging markets were a vital source of demand but CFOs were also looking to Europe for expansion. In a reversal of the situation six months ago, they believed UK growth will have a more positive effect on their investment plans in the next year than growth in emerging markets or in the US, Japan and Asia Pacific.
Official data on Friday showed that productivity had increased in the UK for the first time in two years, adding to the signs of recovery in the economy.
Sir Mike Rake, CBI president, urged big business to invest to help restore its bruised reputation.