Prospects for the future: confidence in business growth and long term optimism 20th CEO Survey – UK findings UK CEOs’ confidence in the global economy continues to decline p2 /A range of growth strategies – including both organic growth and M&A are on the agenda for UK CEOs p3 /Despite the UK referendum vote to leave the EU, Germany overtakes China as a growth engine for UK CEOs p4 /Their assessment of globalisation’s impact remains mixed p5 126 UK CEOs took part in our survey January 2017 www.pwc.com/ceosurvey/ukfuture
Transcript
Prospects for the future: confidence in business growth and long term optimism
20th CEO Survey – UK findingsUK CEOs’ confidence in the global economy continues to decline p2/A range of growth strategies – including both organic growth and M&A are on the agenda for UK CEOs p3/Despite the UK referendum vote to leave the EU, Germany overtakes China as a growth engine for UK CEOs p4/Their assessment of globalisation’s impact remains mixed p5
UK CEOs’ confidence in the global economy continues to decline
UK CEOs’ declining confidence about the prospects for global economic growth continue an ongoing trend that’s emerged in recent years. Our latest survey shows that 17% of UK CEOs expect global economic growth to improve over the next 12 months – that’s down from 30% last year, and well below the global figure of 29% who think growth will improve (see Figure 1). Similarly, almost one-third of UK CEOs think global economic growth will decline over the coming year – up from 23% last year.
If we look back to 2013, UK CEOs were far more optimistic: in that year’s survey, 61% of our respondent CEOs in the UK expected global economic growth to improve, far exceeding the global figure of 44%. This gap then narrowed in 2014 and 2015, and has now reversed.
Figure 1:
Figure 2:But they’re increasingly bullish about their own businesses’ growth prospects
This pattern of declining confidence in global economic growth contrasts sharply with UK CEO’s strengthening assessment of the outlook for their own organisations. Asked to rate their own company’s growth prospects, 89% of UK CEOs say they’re confident for the coming year – that’s up from 85% last time, and above this year’s figures of 85% globally, 88% in the US and just 77% in Germany (see Figure 2).
What’s more, despite their declining confidence over global economic growth, UK CEOs are even more confident about their own businesses’ ability to grow revenues over a three-year timeframe than over the coming 12 months. Some 95% of our UK respondents say they’re confident about their businesses’ three-year growth prospects, compared to 91% globally.
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A range of growth strategies – including both organic growth and M&A are on the agenda for UK CEOs
So, given this high level of confidence in their businesses’ future revenue growth, how will UK CEOs engineer the growth that they’re anticipating? Our survey findings point to a range of strategies.
An overwhelming 91% of UK CEOs say they’re planning initiatives targeted at driving organic growth during the coming twelve months, compared to 79% of all CEOs globally saying the same, 83% in Germany and just 66% in China (see Figure 3). This strong focus on driving growth internally seems to be reflected in UK CEOs’ expectation – as reported in our section on people and talent – that their organisations’ headcount will increase over the coming year.
As well as preparing their organisations for internally-generated expansion, UK CEOs are also planning to seize opportunities for deals-driven growth – with 55% of UK CEOs saying they’re planning new M&A in the coming year, against a global figure of 41% (see Figure 3). While the proportion of UK respondents planning M&A is actually down from 64% last year, the fact that over half are anticipating doing deals underlines their confidence in the outlook for their businesses.
Figure 3:
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Despite the UK referendum vote to leave the EU, Germany overtakes China as a growth engine for UK CEOs
Turning to the countries that UK CEOs regard as most important to their business’s growth over the coming 12 months, the top three remain the same as last year – but there has been an interesting change in the ranking. The US remains the country that UK CEOs regard as most pivotal to their companies’ growth over the next year.
However, the new holder of second place is Germany, cited by 34% of UK CEOs as important to their growth. And China slips to third place at 30%. Despite the prospect of Brexit, it seems the importance of Europe in general – and Germany in particular – to UK businesses’ growth prospects remains strong.
The survey also revealed that the UK is increasingly popular with overseas companies. Business leaders from 16 countries see the UK as more important than last year for their short term growth prospects. CEOs in the US, China, Germany and Switzerland are among those more enthusiastic about investing in the UK.
Figure 4:
Brexit-related uncertainty shows through in their risk perceptions
However, when we asked UK CEOs about what they perceive to be the main risks to their companies’ growth, the impact of the uncertainty springing from the prospect of Brexit is clear. Asked how concerned they are about various economic, policy, social and environmental threats, UK CEOs rank uncertain economic growth top at 84% (compared to 82% among all CEOs globally), exchange rate volatility second at 82% (against 70% globally), and the future of the Eurozone third at 78% (against 56% globally) (see Figure 4).
With Brexit pushing these concerns to the top of UK CEOs’ risk agenda, over-regulation – which they ranked as their top economic threat last year, at 82% – has moved to equal fourth in the ranking, level with geopolitical uncertainty at 74%. Yet at a global level, over-regulation remains the second-biggest economic threat, cited by 80% of all CEOs worldwide.
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Their assessment of globalisation’s impact remains mixed
Asked to assess the extent to which globalisation has helped address a range of global issues, UK CEOs’ responses are mixed compared to those elsewhere – with a consensus emerging among our UK respondents that the benefits that globalisation has delivered in some respects are offset by a failure to make progress in others. Positively, UK CEOs are either as, or more likely than, other CEOs globally to believe that globalisation has helped to create a skilled and educated labour force (UK 95%, global 90%) and to improve the ease of moving capital, people, goods and information (UK and global both 95%).
However, UK CEOs are less likely than their global counterparts to think globalisation has helped to close the gap between rich and poor (UK 47%, global 51%); enable universal connectivity (UK 93%, global 95%); or improve the fairness and integrity of global tax systems (UK 34%, global 59%). This final finding appears to underline the widespread view in the UK that global tax reform is urgently needed.
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