Chief Financial Officers (CFOs) of the UK’s largest businesses are assuming their most defensive strategy stance since the early days of the Covid pandemic, according to Deloitte’s latest CFO Survey.

The Q1 2025 report found that most finance leaders have sharpened their focus on cost control, with 63% citing a strong priority for their business, the second-highest reading on record. 

Added to that, Deloitte’s survey shows that a net 14% of CFOs reported feeling more pessimistic about their business prospects than three months ago, although optimism is still well above the lows seen during 2020 or after the invasion of Ukraine.

Despite the Q1 CFO Survey closing two days before the US announced new tariffs, and amid increasing speculation about more, the findings show finance chiefs’ concern over geopolitical risk and protectionism has risen to its highest level since 2022, at a weighted average rating of 74.

Concerns over weakness or volatility in US growth (rated at a weighted average of 60) also rose to the highest level in five years.

UK CFOs rate a rise in tariffs, sanctions, or restrictions to market access as the most prominent channel through which geopolitics could impact their businesses, with 46% reporting that it is a significant concern for their business, up a sharp 15% from last year.

More evidence of the uncertainty and economic turbulence buffeting UK businesses is that risk appetite has significantly declined among CFOs, with just 12% reporting that now is a good time to take greater risk onto their balance sheet, less than half the long-term average of 25%.

“Given widespread speculation over the scale and scope of US tariff rises during the survey period, it is unsurprising that CFOs reported elevated levels of uncertainty,” said Amanda Tickel, head of tax and trade policy at Deloitte UK.

“This is still a rapidly evolving environment, and businesses will need to be proactive in mitigating the effects of tariffs, however, they will be unlikely to reconfigure their global supply chains or production until they see the results of negotiations or responses by other nations.

“Being across every element of a product’s journey from its origin to its value, to its tariff classification, will stand businesses in good stead wherever the tariffs finally land.”

The gloomy geopolitical outlook led 63% of UK finance leaders to believe that operating costs will continue to increase over the next year, alongside 35% who expect a decline in operating margins, while only around a third (35%) think that revenues will increase.

Deloitte found inflation expectations have also increased for the third consecutive quarter, to 3.1% over the next year and 2.6% over the subsequent year, up from 2.5% and 2.4% respectively in the previous edition of the CFO survey.

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Looking ahead to the next twelve months, CFOs expect to see the sharpest decline in corporate hiring since Q3 2020, and predict wage growth to slow from 3.6% to 3%.

Along with the reduction in corporate hiring, a net 30% of UK CFOs forecast that corporate capital expenditure will decline over the next year, and 58% expect to see a decline in discretionary spending.

“Although large UK businesses are preparing for turbulence, levels of pessimism have not fallen to the low that was seen during the pandemic,” said Ian Stewart, chief economist at Deloitte UK.

“Finance leaders have a continued focus on costs and hiring, and the prioritisation of more defensive strategies is standard practice amongst business leaders during challenging times.”