By Maximilian Clarke
The UK’s CEOs are more optimistic than their European counterparts and continue to invest in their companies- boosting headcount globally at a greater rate, analysis from PwC’s annual global survey shows.
The news comes on the day the Office for National Statistics' preliminary estimate showed a 0.2% drop in the UK GDP, prompting concerns of a recession. PwC's research, however, suggests that the UK's business leaders are not similarly concerned by the prospect of recession and are instead anticipating growth.
And with 79% of UK CEOs more upbeat about revenue growth in the next year compared with 64% of CEOs in those eurozone countries surveyed, there are encouraging signs that the UK may be faring better, in confidence terms, in the face of continued uncertainty in European and global markets. While only 29% of UK CEOs are very confident of growth in the next 12 months, 46% are very confident of growth in the next three years and at least 92% somewhat confident of growth over three years.
“Our prognosis is that CEOs should expect the current pattern of volatile financial markets and relatively slow growth in western economics to continue,” commented Ian Powell, PwC’s Chairman and Senior Partner. “The challenge for the UK CEO is ensuring that their companies remain flexible, maintain cost controls and restructure to adapt to this slower growth environment.
However overall, UK business leaders say the outlook for global economic conditions remains challenging, with 89% of UK CEOs believing it will not improve, or decline further in 2012. Further cost reductions are anticipated, as UK CEOs focus on reinforcing and building share in existing markets rather than expand into new ones.
UK CEOs are sticking with what they know, saying their best chance for growth in the next 12 months is more likely to come from increasing their share in existing markets, with less than a quarter (22%) looking for growth from new products or services, and 18% from new geographic markets.
Given that 53% plan to increase global headcount in the next 12 months, and 21% say they expect to cut their global workforce in the coming year, it is encouraging to see that 85% of CEO’s say they have access to the talent needed to deliver their company’s strategy over three years.
The major concerns on the minds of UK CEOs in the 15th annual survey include uncertain and volatile economic growth (86%), the Government’s response to the fiscal deficit (74%), lack of stability in capital markets (72%) and over-regulation (60%).
“Growth opportunities still exist, particularly in faster growing emerging market economies and where new technology is opening up possibilities — in areas as diverse as online retailing and low carbon energy,” continued Powell. “The challenge now is to ensure that the experience of slower growth in traditional markets and the uncertainty created by more volatility does not prevent them taking advantage of these areas of new opportunity. Many CEOs are saying that they have already taken action to mitigate the ongoing eurozone debt crisis and it is hoped that this will have built resilience and competitive advantage into their businesses.”
“In the UK, there is little doubt that the outlook remains tough and complex but the UK benefits from having a credible and robust plan for bringing our public sector deficit down. Essential to UK growth is confidence in UK SMEa where fears remain about liquidity, regulation and the Eurozone. A consequence of this is that cash held in companies as a protection against these factors is not being invested, which could damage UK competitiveness in the longer-term.”
For UK CEOs the majority of their key business outside the domestic market is in Western Europe, with 45% engaged in North America, 28% involved in the Middle East and 8% in Africa. An interesting development this year is that although China is still perceived as an important territory for growth, this is at a lower level than last year’s survey with just 26% of CEO’s saying that they see the most important growth opportunities in China compared with 42% in 2011. Interest in Brazil has also dropped off from 15% to 5% in the12 months, with interest in India at 12%.
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