Prolonged political uncertainty in Britain is forcing finance directors to cut costs and hold off hiring to help companies prepare for an unpredictable year ahead, according to a survey by Deloitte.
The audit of 91 chief financial officers of some of Britain's largest companies showed that a renewed focus on cost control will be a strong priority for six in 10 of respondents over the next year, the highest level for 10 years.
According to seven in 10 of the CFOs, hiring will reduce in the next 12 months, while almost half will focus on trying to increase cash flow.
"Perceptions of uncertainty are elevated and corporate risk appetite is vanishingly low," said Ian Stewart, chief economist at Deloitte. "The priority appears to be curbing costs, not expansion."
Britain's economy has been buffeted by Brexit. Output shrank in the second quarter when businesses found themselves holding unnecessary stock that had built up before the original leaving date.
The Deloitte report said the resulting uncertainty was now entrenched while domestic economic factors such as weak productivity and competitiveness are a growing concern.
With weak demand in Britain becoming the second biggest risk facing companies, expectations of an interest rate cut are also growing.
"With Brexit cited as the biggest risk businesses face, the last quarter has also seen heightened concern over slowing growth in the UK and Eurozone and CFOs are tightening their purse strings in response," Stewart said.
The fate of Britain's departure from the European Union will become clearer in the next three weeks, ahead of the new Brexit deadline on October 31.
British Prime Minister Boris Johnson has promised to deliver Brexit by that date, meaning the world's fifth largest economy will either leave with a transition deal, ask for a further delay, or leave without a deal, a move that will likely spark huge economic disruption.
Deloitte said 91 CFOs contributed to the survey, drawn from FTSE 100 or 250 companies, or from the biggest unlisted companies in the UK. The combined market value of the 70 UK‑listed companies surveyed is 468 billion pounds, or approximately 19% of the UK quoted equity market, Deloitte said.