By Daniel Hunter
More than half of the North West’s business leaders are confident in their own company’s outlook for 2012, despite the gloomy economic environment, according to KPMG’s ‘Business Instinct’ poll of the region’s larger companies.
Against a backdrop of a double dip recession in the UK and ongoing turmoil in the Eurozone, 56 percent of the region’s executives are optimistic about the prospects for their own business - more than five times as many as those who feel pessimistic about the road ahead (11 percent).
Perhaps surprisingly, however, the region’s senior executives appear to have a relatively relaxed attitude towards the growing sense of crisis in the Eurozone and the impact it would have on their business. Less than one third of respondents rated economic instability on the continent as one of the top three issues facing their business over the coming year.
“I do find it somewhat curious that economic and political instability in Europe was cited as a pressing concern by less than a third of our region’s business leaders, especially when you consider that 80 percent of them said that they have exposure — be it in the form of operations, investments or even supply chains - across the Channel," Jonathan Hurst, chairman of KPMG in the North, commented.
“Though this saga may not be taking place on our immediate doorstep, one cannot underestimate the scale of financial interconnectivity and dependency between the two regions. My fear is that if it is not stabilised, the Eurozone crisis may prompt an economic domino effect, which would undoubtedly have far-reaching implications across the North West. I just hope any suggestion of an ostrich mentality does not come back to haunt the region further down the line.”
Looking in more detail at their expectations for 2012, 70 percent of companies predict a rise in turnover and just under two thirds (62 percent) expect a profit boost, though a more modest 42 percent anticipate that their workforce will grow over the course of the year.
However, there nevertheless remains a host of issues which are furrowing the brows of those influencing the prosperity of the North West marketplace. Top of the worry list is a lack of economic growth, which was cited as one of the three most pressing concerns by exactly half of all respondents, very closely followed by margin erosion (48 percent) and access to finance (33 percent).
The relative buoyancy in mood was also tempered by caution in executives’ plans to accelerate plans for investment. Only 14 percent of businesses expected to increase their capital expenditure over the next twelve months, while 11 percent had either delayed or even stopped investment altogether for the foreseeable future.
“I have to admit that the relatively low proportion planning to boost their investment programme gives me slight cause for concern," Hurst said.
"As existing investment plans are likely to be at fairly low levels, a lack of further investment could risk undermining the positive expectations around financials. It leaves me wondering how many businesses will be pressing the button on significant capital expenditure, having secured the necessary funding.
“Our survey tells a story of senior executives who remain sensitive to the difficult climate, but whose passion for their own business and enthusiasm about their prospects has not been too dramatically dampened. Indeed, our findings complement anecdotal evidence from our clients — both big and small - of a regional business community working hard to navigate the challenges presented by current economic conditions but who are hotly poised to seize any opportunities for growth that arise over the coming months.”
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