Despite EFSF Cash Injection, UK Corporates Remain Doubtful Of Confidence Being Restored In Eurozone

Despite last night’s decision by Eurozone leaders to boost the European Financial Stability Facility (EFSF) from the current €440 billion to around €1 trillion, research conducted by Investec Corporate & Institutional Treasury with senior executives shows that they do not believe that the European Financial Stability Facility will be sufficient in securing confidence in Eurozone sovereign debt markets.

The research revealed:

83% of senior executives doubt the EFSF will secure confidence in Eurozone sovereign debt markets
60% predict their business will grow despite Eurozone ‘drag’
52% cite easing immigration rules as key to supporting business growth
Only 3% felt the euro would be higher against sterling in 12 months’ time
38% are considering expanding into new markets to grow their business

Commenting on the Eurozone crisis, Sir Howard Davies, former deputy governor of the Bank of England and former executive Chairman of the FSA said: “I remain pessimistic about the Eurozone’s ability to produce a comprehensive solution to the crisis that everyone is hoping for. We should not let the current focus on the EFSF detract from the need to ensure that Eurozone banks remain sufficiently capitalised. If Greece can be isolated from the rest of the Eurozone, the implications for UK companies and the wider economy should not be as damaging as some are predicting. Without ring-fencing Italy and Spain, the results could be catastrophic.

Commenting on which of the main global currencies is likely to outperform, Sir Howard added: “It’s easier to produce a case for why the euro, sterling, dollar and yen will all continue to be weak. I predict the dollar will strengthen modestly as the US economy isn’t quite as flat as many people feared.”

James Arnold, Investec Corporate & Institutional Treasury said: “With so much uncertainty lingering around the Eurozone, our clients know it is essential to protect their business from unexpected and adverse currency fluctuations. This is all the more pressing considering that a majority of clients have exposure to the Eurozone area.”