Finance leaders are predicting the steepest drop in corporate recruitment since Q3 2020 due to escalating geopolitical threats.

A new study by Deloitte indicates a weakening job market, with wage growth anticipated to decelerate from 3.6% to 3%, as reported by City AM.

A net 14% of CFOs reported feeling more negative about their business outlook compared to three months ago.

This sentiment follows a hit to business confidence in the wake of the Autumn Budget.

Chancellor Rachel Reeves' series of tax increases has resulted in companies either scaling back on hiring or raising prices.

Changes to employers' national insurance contributions and the minimum wage have put pressure on businesses' finances. A net 63% of those surveyed anticipate operating costs to rise over the next year.

In contrast, only 35% forecast revenue growth, with most expecting shrinking margins.

The report suggests that executives predict interest rates will drop to four per cent, with inflation projected at 3.1% for the coming year.

Amid these conditions, finance chiefs are demonstrating increased caution towards the UK economy. Only 12% believe now is an opportune time to take on more risk, compared to the long-term average of 25%.

Deloitte's report reveals that geopolitical risks are the top worry for business leaders, reaching the highest level since early 2022 – when Russia invaded Ukraine.

Concerns about volatility in the US economy have reached their highest point in nearly five years. Since taking office in January, President Donald Trump's inconsistent approach to tariffs has caused significant fluctuations in global markets.

These concerns were highlighted before Trump's announcement of new levies in his 'Liberation Day' speech, which were later partially retracted, leaving a hefty 145 per cent import tax on China still in place.

The survey found that almost half of finance chiefs now view tariffs, sanctions, and market access restrictions as major worries, a sharp rise from just 15 per cent last year.

This climate of uncertainty has prompted executives to postpone significant alterations to supply chains or production processes.

Amanda Tickel, Deloitte UK's head of tax and trade policy, commented: "Given widespread speculation over the scale and scope of US tariff rises during the survey period, it is unsurprising that chief financial officers reported elevated levels of uncertainty."

She further noted: "This is still a rapidly evolving environment, and businesses will need to be proactive in mitigating the effects of tariffs, however, they will be unlikely to actually reconfigure their global supply chains or production until they see the results of negotiations or responses by other nations."

In response to these growing challenges, Deloitte's report indicates that UK chief financial officers are now employing their most cautious strategies since early 2020.

This involved 63% of participants placing a greater emphasis on cost-cutting measures - the second-highest percentage recorded.

There was a net expectation of 30% for decreases in capital expenditure, and 58% of respondents predicted reductions in discretionary spending.

Ian Stewart, Deloitte UK's chief economist, commented: "Although large UK businesses are preparing for turbulence, levels of pessimism have not fallen to the low that was seen during the pandemic.

"Finance leaders have a continued focus on costs and hiring, and the prioritisation of more defensive strategies is standard practice amongst business leaders during challenging times."