UK corporates doubt Eurozone stability measures

Posted on 21 Oct 2011 by The Manufacturer

Over 80% of senior UK corporate executives do not believe that the European Financial Stability Facility will be sufficient in securing confidence in Eurozone sovereign debt markets.

The European Financial Stability Facility (EFSF) is a special purpose vehicle financed by members of the eurozone to combat the European sovereign debt crisis. It was agreed by the 27 member states of the European Union on 9 May 2010, aiming at preserving financial stability in Europe by providing financial assistance to eurozone states in economic difficulty.

The findings are according to a survey of senior executives at a client briefing hosted by Investec Corporate & Institutional Treasury, part of Investec Bank.

Despite the fact that a staggering 93% of executives surveyed are concerned (37% were ‘very concerned’) about the potential risks posed to their businesses by the Eurozone crisis, three fifths (60%) expect their firms to grow over the next 12 months. Nearly half (47%) predict organic growth while around one in 10 (13%) are planning to grow through acquisition.

When asked to identify how the Government could help their business to grow, over half (52%) of respondents thought that immigration rules should be eased while 14% thought that additional incentives should be given to banks to lend capital to businesses.

The research showed that nearly four in ten (38%) executives intend to grow their business over the next year by expanding into new markets. Furthermore, a quarter (24%) have already put in place a hedging strategy to protect themselves against further currency volatility. The overall majority of executives (53%) in attendance felt that the euro would be down on sterling over the next 12 months, but that the current high market volatility could provide excellent opportunities in FX markets with nearly 1 in 4 (23%) planning to use FX option products more over the next 12 months.

Phil Shaw, Chief Economist for Investec in London commented: “It is critical that European leaders act quickly and decisively to stabilise Euro area sovereign debt markets and steer the global economy away from the threat of another recession. Even if they are successful, huge challenges remain in addressing the longer-term structural flaws in the Eurozone.”