Capital Allocation

61% of CFOs: Currently at Operational Capacity, CapEx Not Needed

Lack of funding, unfavorable financing are also halting investment, per Duke and Richmond Fed CFO survey.
Adam ZakiMarch 29, 2023
61% of CFOs: Currently at Operational Capacity, CapEx Not Needed
Photo: Monty Rakusen

CFOs have not shied away from expressing confidence in their own abilities to do well during an economic downturn. This confidence includes how finance chiefs have elected to invest in their organizations. 

Nearly two thirds (61%) of CFOs told Duke University and the Federal Reserve Banks of Richmond and Atlanta in their recent Q1 2023 CFO Survey they have no need to expand their operational capacity, due to uncertainty, lack of funding, and return on investment.

Capital Expenditure Breakdown

Spending on land and equipment was little changed from previous quarters, data showed. Nearly one-third (31%) of CFOs told surveyors they plan on purchasing, renovating, or building structures, while 58% reported plans to purchase equipment. Those figures are up 2% and down 6% from last quarter, respectively. 

In a continued pattern of cost saving and asset optimization, a majority (83%) of CFOs report a large portion of their equipment spending will go into repair and replacement efforts. Increasing capacity, introducing new products or services, and reducing reliance on labor are also areas in which financial leaders plan on allocating towards. 

Capital Access Increasingly Difficult 

According to the CFO Survey, which was taken from February 27 to March 10, the number of CFOs who reported lack of funding as reasons to halt capital expenditures more than doubled to 13% in Q1 of 2023, along with unfavorable financing being cited by nearly quarter (24%) of leaders. The latter figure was up 10 percentage points from Q3 of 2022.  

As compared to the survey’s findings last quarter, access to capital issues are becoming increasingly more common for CFOs. Whether finance leaders can’t secure financing or the cost is too great due to rising interest rates or banking issues, the ability for corporations to borrow has become increasingly more difficult.