The Evolving Role of a UK CFO

The role of the Chief Financial Officer (CFO) in the UK is undergoing significant evolution, expanding beyond traditional financial responsibilities to become a strategic partner in driving business growth and decision-making. The biggest challenge for a CFO is navigating the complex and often unpredictable financial landscape, which requires balancing short-term financial health with long-term strategic goals.

The focus is shifting towards that of a Chief Value Officer (CVO), with CFOs being tasked with strategy and reporting across a range of non-financial business drivers, with a Value Creation Focus.

1. How the CFO role is evolving in the UK

Strategic Leadership

CFOs are increasingly expected to be commercially minded, strategic partners who collaborate with other C-suite executives in making critical decisions to drive business growth and not solely profitability. The CFO’s remit is expanding to cover areas traditionally outside of finance, including Digital Transformation, Regulatory/Risk Compliance, People Management Strategy, Sustainability and ESG initiatives, Business Partnering/Value Creation.

In a recent survey, 39% of CFOs believed their role would evolve to include increased strategic influence and involvement in decision making. Understanding the opportunities/risks of Artificial Intelligence emerged as one of the CFOs top strategic priorities over the next twelve months.

Digital Transformation

CFOs are adapting to uncertainty by investing in innovation and cutting-edge technologies such as automation and artificial intelligence. In a recent survey, 93% of CFOs interviewed had a digital transformation programme for their finance function planned over the next 12 months. The pressure to demonstrate return on investment has never been greater and CFOs cited ‘financial constraints’ as the top challenge they anticipate in leveraging digital.

Regulatory Compliance and Risk Management

With increasingly complex regulatory frameworks, CFOs need to work closely with governance, risk, and compliance teams to navigate evolving regulations, particularly in areas such as anti-money laundering and cybersecurity. In a recent survey, 39% of CFOs believed their role would evolve to further include enhanced risk management and compliance oversight.

In a recent survey, CFOs cited Artificial Intelligence as the top risk (both internal and external) they expect to face over the next twelve months.

People Management and Talent Development

There is a growing emphasis on “softer skills” for CFOs, including: Enhanced communication abilities, Leadership skills, Emotional intelligence, and Adaptable communication styles. In a recent survey, 40% of CFOs believed their role will increasingly focus on people management and talent development.

As flexible working becomes an expectation for many employees, over 30% of CFOs said that ‘changing employee expectations’ is one of their top challenges in attracting and retaining talent.

Value Creation/Finance Business Partnering

In a recent survey, CFOs saw Value Creation through Finance Business Partnering as their top strategic priority over the next 12 months. There is increasing demand for the finance function to extend their focus from operational delivery and empower the business to make value creating decisions.

2. The Current Economic ‘Climate

CFOs recently surveyed said despite increased flexibility from lenders and more competitive terms, accessing funds remains challenging. 77% of CFOs are looking to secure additional funding over the next six months to fund their growth plans.

Strategic tax planning is becoming a growing priority for CFOs today with increased emphasis on tax risk and governance. Nearly 75% of CFOs surveyed saw the role of tax planning as an important factor in their company’s financial growth trajectory.

Throughout 2023, there was a material reduction in M&A activity globally, due to rising interest rates and macroeconomic factors. 80% of CFOs recently surveyed anticipated M&A activity will contribute to their financial growth strategy over the next twelve months.

Faith in the market appeared restored following the General Election and the more stable economic environment. However, the British Chambers of Commerce’s (BCC) Quarterly Economic Survey (QES) for Q4 2024 indicates that business confidence has been adversely affected by recent fiscal policies. The survey, which gathers insights from over 6,000 businesses across the UK, reveals that key economic indicators have either stalled or declined in the final quarter of the year.

A significant factor contributing to this downturn was the government’s Autumn Budget, announced in October 2024, which introduced substantial tax increases. Notably, employers’ National Insurance contributions were raised by 1.2 percentage points, and the threshold for these contributions was lowered from £9,100 to £5,000. These measures are expected to generate £25 billion annually but have raised concerns among businesses about increased operational costs and potential impacts on hiring and wage growth.

The Confederation of British Industry (CBI) conducted a survey revealing that 61% of its members now view the UK as a less attractive destination for investment due to these tax changes. Additionally, nearly half of the surveyed businesses plan to reduce staff or limit pay increases in response to the heightened financial burden.

In response to these concerns, Chancellor Rachel Reeves has assured businesses that there will be no further tax increases or additional borrowing in the near future. However, the current sentiment among CFOs and business leaders remains cautious, with many advocating for a more stable and predictable fiscal environment to foster economic growth and investment.

Overall, the Q4 2024 QES highlights a period of economic uncertainty, with businesses expressing apprehension over recent tax policies and their potential long-term effects on the UK’s economic landscape.

3. What are the most common reasons for CFO turnover in the UK

Decade-high turnover among chief financial officers in the UK and elevated departure rates in the US and Europe have left large companies scrambling to fill the role, forcing many to expand their searches, rethink requirements and pay more to their top choices. Twenty-nine FTSE 100 businesses, including Unilever and Schroders, changed their CFO in 2023 (the most since at least 2013, when data became available). Changes remained at the ‘higher than normal’ level of 17 per cent across the big European markets and the S&P 500. Alphabet, Tesla and Nestlé were among those appointing new CFOs last year.

Common reasons for CFO turnover in the UK include:

–              Retirement – Retirement rates for CFOs have sharply increased over the past four years, with the average retirement age for CFOs being 57. In 2023, 60% of departing CFOs in Europe were retiring

–              Expanded Role and Responsibilities requiring strategic oversight. The expanded role can lead to burnout and increased pressure

–              Economic Uncertainty and Performance Pressures. CFOs are facing increased scrutiny in challenging economic conditions. Boards and investors may hold CFOs accountable with the CFOs often becoming the “person who takes much of the blame”

–              CEO Changes. New CEOs frequently opt to bring in their own team, leading to CFO departures

–              Career Advancement. Some CFO turnover is due to career progression with some CFOs moving to private equity-owned businesses or companies preparing for IPOs

–              Regulatory Changes. Recent regulatory changes require companies to report on a wider range of subjects, including climate change, diversity policies, and cybersecurity making the CFO role less attractive to some.

–              Changing Work Preferences. The quarterly earnings grind and high-pressure nature of the role are leading some CFOs to seek alternative career options. Many retiring CFOs are transitioning to board roles or building varied portfolios.

4. Female CFO UK trends

Key trends regarding female CFOs in the UK:

Increasing Representation:

• The number of female CFOs in the FTSE 100 has increased to 24 out of 100 companies.
• This outnumbers female CEOs more than two to one, as there are only 10 female CEOs in the FTSE 100.

Recent Appointments:

• 14 of the 24 female CFOs in the FTSE 100 have been in their current role for less than two years, indicating a recent trend of appointing women to these positions.

Dual Female Leadership:

• Four FTSE 100 companies (Aviva, Diageo, GSK, and Severn Trent) have both a female CEO and CFO.

Longer Tenures:

• Some female CFOs are achieving longer tenures.

Industry Variations:

• In the insurance sector, female CFOs accounted for only 16% of the UK total in 2023 (63 out of 390), indicating that some industries are lagging in female representation.

Challenges:

• The CFO role has historically been perceived as requiring traditionally masculine traits like toughness and aggressiveness, which may have deterred some women.
• Women still face stereotypical expectations in leadership roles, which can create additional challenges.

Positive Outlook:

• There’s a growing recognition that diverse organizations are more successful, which is driving efforts to increase female representation in CFO roles.
• Remote and hybrid working arrangements are seen as beneficial for women in leadership positions, potentially enabling more women to take on CFO roles.

Need for Mentorship and Support:

• Mentorship programs and networking forums are being used to support and encourage more women to pursue CFO positions.

While progress is being made, there’s still room for improvement in achieving gender parity in CFO positions across all industries in the UK.

5. What is the hiring activity for CFOs in the UK?

CEOs and companies are looking for CFOs with a broader skill set with a shift towards valuing strategic and inspirational leadership over traditional finance expertise. The expanded CFO role expectations impacts hiring criteria with increased focus on strategic leadership and business partnering. More than 8 in 10 CFOs see their role as a potential stepping stone to becoming CEO.

There is a competitive and challenging recruitment landscape for CFOs. Companies are having to be more flexible and offer more competitive compensation to attract the right candidates for CFO positions.

In terms of CFOs hiring, the top skills CFOs intend to prioritise hiring for are: AI and automation expertise, ESG strategy and implementation, and finance business partnering.

Conclusion

There’s a shift towards valuing strategic and inspirational leadership over traditional finance expertise. Non-traditional skills like engaging talent, fostering C-suite relationships, and continuous learning are becoming more important. As the CFO role continues to evolve, finance leaders in the UK will need to embrace continuous learning, develop a diverse skill set, and leverage technology to meet the expanding expectations of their position. By focusing on these key areas, CFOs strive to navigate the complex economic landscape while positioning their organisations for future growth and stability.