🏠︎ | Past Sessions | The Road Ahead, What Finance Leaders Need to Know About the Economic Outlook
- Event: Finance Forum 25
- Date: 7 October 2025
- Speaker: Peter Arnold, UK Chief Economist, EY
- Estimated read time: 6-7 minutes
Quick summary
This session explored how finance leaders should interpret the economic signals beneath the headline noise.
Peter Arnold argued that the economic outlook is neither uniformly strong nor uniformly weak. Instead, it is characterised by volatility, uneven momentum across sectors, and rapid shifts in sentiment. Traditional indicators remain useful, but only when read together and with an understanding of what may be temporary reactions rather than structural change.
For finance leaders, the challenge is less about forecasting a single outcome and more about building resilience, testing assumptions, and ensuring decisions remain flexible as conditions evolve.
The economy is reacting fast, but not always rationally
Arnold opened with a reminder that markets and sentiment often move faster than fundamentals. He pointed to business surveys such as purchasing managers’ indices, which showed sharp dips immediately following tariff announcements, before recovering through the summer.
The message was not that risks had disappeared, but that initial reactions can exaggerate the underlying picture. For finance leaders, this reinforces the need to distinguish between short term shocks and longer term trends when advising boards and executive teams.
Retail data provided a similar example. Stronger than expected sales through the summer suggested consumer demand had more resilience than many forecasts assumed, helped in part by seasonal factors. The implication was clear, context matters when interpreting data.
Why sentiment indicators still matter, with caveats
Business sentiment surveys remain a valuable early signal, but Arnold cautioned against treating them as precise forecasts. They capture how firms feel at a moment in time, which can be heavily influenced by political announcements, media coverage, and uncertainty rather than actual trading conditions.
Used well, these indicators help finance teams spot inflection points early. Used poorly, they can lead to overreaction. The practical discipline is to combine sentiment data with harder indicators such as output, employment trends, and consumer behaviour before changing strategy.
Arnold emphasised that finance functions should help leadership teams understand what the data is really saying, not simply report the latest index movement.
Inflation, rates and the lag effect
A recurring theme was the lag between economic policy changes and their real world impact. Interest rate movements, for example, take time to feed through to investment decisions, household spending, and business costs.
This creates a risk of misreading the current environment. Conditions may look stable or improving, while pressure is still building beneath the surface. For finance leaders, this reinforces the importance of scenario thinking rather than reliance on a single central forecast.
Arnold framed this as a governance issue as much as an economic one. Boards need to understand not just where the economy is today, but how delayed effects could shape performance quarters ahead.
Volatility is becoming the baseline
Rather than describing the outlook as unusually uncertain, Arnold suggested volatility itself is becoming a more permanent feature. Trade policy shifts, geopolitical tension, and rapid changes in financial conditions all contribute to a less predictable environment.
This has implications for planning cycles. Static annual budgets and fixed assumptions become less effective when conditions can change materially within months. Finance teams are increasingly expected to refresh views, challenge assumptions, and support faster decision making.
The economic outlook, in this framing, is not a single narrative but a moving set of risks and opportunities that need continuous interpretation.
From forecasting to decision support
A key underlying message was the evolving role of finance. Producing a forecast is no longer the end goal. The real value lies in helping leaders understand the range of possible outcomes and the trade offs involved in each.
Arnold highlighted the importance of asking better questions. What assumptions are driving this forecast. Which variables matter most. Where are we most exposed if conditions change faster than expected.
This shift aligns with the broader move from reporting to decision support. Finance leaders act as translators between economic signals and strategic choices, rather than as passive providers of numbers.
What good looks like, practical actions for finance leaders
This session translates into several concrete actions for finance teams navigating the current economic outlook.
Questions to ask now- Which indicators are we weighting most heavily, and why
- Where might we be overreacting to short term sentiment
- What assumptions would break our plan if conditions shifted quickly
- How exposed are we to lagged effects from rates, costs, or policy
- Divergence between sentiment surveys and actual activity
- Changes in consumer behaviour that outpace headline forecasts
- Policy announcements that may trigger temporary volatility
- Evidence of delayed impacts from earlier economic tightening
- Treating one data point as decisive
- Locking strategy to a single economic scenario
- Assuming stability means risk has passed
- Separating economic insight from operational decisions
What strong finance leadership looks like
Effective finance leaders help their organisations stay grounded when headlines move fast. They provide balanced interpretation, stress test decisions, and keep strategic options open. In a volatile environment, this ability to interpret the economic outlook with judgement becomes a source of competitive advantage.
Conclusion, resilience beats precision
The session’s central message was that precision forecasting is less valuable than resilient decision making. The economic outlook will continue to shift, sometimes abruptly, and not always in ways models predict.
Finance leaders add the most value when they focus on understanding signals, challenging assumptions, and guiding organisations through uncertainty with clarity and discipline. In that sense, the road ahead is less about predicting the future and more about being ready for it.
Speaker
UK Chief Economist, EY. Leads EY’s UK and Ireland economics capability, advising businesses and governments on economic conditions, policy and long term trends.