U.K. Companies Seen Boosting Borrowing as CFOs Embrace Risk

U.K. companies are poised to increase borrowing to finance growth and acquisitions this year as a rebounding economy encourages chief financial officers to take greater risks, according to Deloitte LLP.

Seventy-one percent of CFOs said it’s a good time to take on more debt, the biggest show of confidence in 6 1/2 years, according to a survey of 126 executives published by the London-based consulting firm today. Ninety-five percent of CFOs expect mergers and acquisitions to increase.

“CFOs are now more confident about growth in developed economies, particularly the U.K.,” Ian Stewart, chief economist at Deloitte in London, said in the report. “Easy monetary policy and favourable financing conditions have created a capital-rich environment. CFOs are likely to draw down on that capital over the next year to fund expansion.”

Central bank stimulus measures helped propel the U.K. economy from recession to expansion that’s forecast to reach 2.7 percent this year, according to economists surveyed by Bloomberg in March.

Executives surveyed by Deloitte said credit is cheaper and more easily available than at any time in the past 6 1/2 years. The average yield investors demand to hold investment-grade corporate bonds in pounds is 3.96 percent compared with an average 5.17 percent during the last five years, Bank of America Merrill Lynch’s sterling corporate index shows.

Low borrowing costs helped boost acquisitions by western European companies to $149 billion in the first three months of the year, almost 60 percent more than the same period in 2013, according to data compiled by Bloomberg. Three consecutive quarters of growth in the euro-area economy also encouraged investment.

To contact the reporter on this story: Stephen Morris in London at smorris39@bloomberg.net

To contact the editors responsible for this story: Shelley Smith at ssmith118@bloomberg.net Jennifer Joan Lee, Tom Freke

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