By Steve Purdy, UK Managing Director, Regus
Globally, business confidence has a suffered a series of difficult setbacks in the past few years and latterly, when conditions had finally begun to look as though improvement was on the cards, the Eurozone crisis seriously affected global markets with wide-reaching damage including cut-backs in capital flows to emerging economies.
In addition to this, spreads within interbank interest rates and central bank overnight lending rates continue to rise indicating high levels of concern over counter-party risk by private banks.
In order to provide business leaders and companies with an up-to-the-minute view of their peers’ outlook for the coming year and their business insight, the Regus Business Confidence Index Report surveys business managers and owners from all over the world on a six monthly basis.
In addition to enquiring about revenues and profits over the past year, and about their revenue expectations for the next 12 months, the latest edition of the report also analysed their views on factors that had caused particular corporate distress during the downturn, stability creating policies for future growth and cost saving measures that do not hinder company growth.
Every six months Regus also compiles its Business Confidence Index presenting a view of global Business optimism. This index is a measurement formed on an aggregate of positive statements combining year-to-date revenue and profit trends with views on the timing of the full momentum of economic recovery and aims to provide businesses across the globe with a barometer of business confidence and expected growth. The benchmark average for the index was set at 100 in the first publicly published edition in September 2009.
In the first half of 2012 global business confidence appears to be stabilising after a massive -11 point variation between March and September 2011, with a slower contraction in business confidence, down just one point to 113. While emerging economies such as Brazil, India and China remain the highest scorers Germany also confirms its place as third most confident nation. Japanese companies score particularly low as the country still struggles with the aftermath of the March 2011 earthquake while high household debt is affecting prospects in the Dutch market.
As conditions begin to stabilise businesses globally are still trying to reduce overheads, but only provided these do not affect growth. Globally, the majority of businesses identify shortening the supply chain (40%), reducing fixed office space (39%) and using more IT cloud applications (39%) as the key cost reducing measures that will not hamper their future growth prospects. It is interesting to note that all these measures bring about greater flexibility within the workplace highlighting that businesses globally are embracing new ways of working in their pursuit of growth.
By contrast respondents identified inflexibilities and fixed overheads as the factors that contributed most to creating corporate distress during the global economic downturn. In particular, the well-documented credit squeeze in the form of difficult access to cost effective capital was singled out by almost half of respondents (47%). The second most damaging factor was identified to be the cost of unnecessary office space (45%), followed by inflexible margins paid to distributors, resellers or introducers (44%).
Businesses also highlighted the initiatives that they believed would be most likely to contribute to economic stability and create a solid basis for future growth. The top initiative was found to be a wider distribution of customers (45%), complementing previous reports that the majority of firms globally are looking to expand abroad in the next few years. Felxibility-enhancing measures followed with firms calling for more flexible working conditions for staff (37%) and an increase in remote working (32%).
After a staggering decrease on the back of stock market and Eurozone crises between March and September last year, business confidence seems to be stabilising. While governments try to reduce sovereign debt and stabilise the euro area, businesses too are looking for ways to contain and even reduce overheads while going for growth.
In order to achieve their growth objectives businesses, having learnt the hard way how damaging inflexible overheads can be in a difficult economic climate, are favouring more flexible ways of working and choosing to remain agile.
Companies are therefore placing particular emphasis on shortening the supply chain and introducing more flexible working arrangements for staff both in terms of time and location. By increasing remote working and reducing fixed office costs companies will cast off the heavy burden of underused and unnecessary office space freeing up capital which can be invested more efficiently elsewhere in the drive for growth.
There is no doubt, therefore, that businesses opting for greater scalability and flexible workspace will increase in the coming years as they take advantage of scalable workspace solutions readily available on the market.
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