CEOs are relatively upbeat about the growth of revenues in the mid-term, a study from PwC finds. The most important countries for future growth is shifting however, towards more developed countries. The negative effects of globalisation are too on the minds of CEOs, as a global backlash against current economic policies continues.
PwC’s latest CEO survey, the 20th in the series, asked nearly 1,400 CEO's from 79 countries about key current trends affecting their respective business. The survey, which was released as part of the wider World Economic Forum 2016 conference in the Swiss city of Davos, highlights increasing concerns around globalisation.
The survey finds that, even with the political and economic turmoil faced by a host of nations, CEOs are increasingly confident about short- and mid-term revenue growth, as well as the direction of world economy growth as such. CEOs very confident in 3-year revenue prospects has increased 2 percentage points to 51% since last year, while CEOs very confident in 12-month revenue prospects are up 3 percentage points to 38% since last year. Around 29% of respondents are confident global economic growth will improve.
While confidence is running relatively high for future revenue growth, a considerable shift has taken place regarding the countries viewed as supplying the conditions for their overall growth prospects for the coming 12 months. The US has, since 2011, increased its standing from second (21% in 2011) to first (43% in 2017), reflecting its recent strong recovery from financial crisis lows. China has fallen slight, from first place (39%) to second place (33%) on the back of its relative economic slowdown and potential for economic bubble. Brazil’s placing has collapsed on the back of its political and economic turmoil, falling from third (19%) to seventh (7%).
The UK has seen its standing increase markedly since 2011, jumping from seventh place (7%) to fourth (15%) even while it is dogged by Brexit uncertainty, while Germany has boosted its standing by two spots, from fifth (12%) to third (17%).
Globalisation has been a key policy driver for business in recent decades, offering opportunities to leverage global competition to, among others, lower tax rates, reduce labour bargaining power by expanding the labour pool and cut costs. Profits have, as highlighted by a recent report, increased fivefold in 30 years as a result.
According to the CEO survey, questions remain around the effect of globalisation policies on social cohesion – a key theme within the wider business community as increasingly protectionist and nationalist parties gain political share across the globe.
When asked about the benefits and downsides of globalisation, considerable disparity exists. Most CEOs (96%) believe that it has improved the ease of moving capital, people, goods and information, with a similar number stating that is has enabled universal connectivity. It too has supported the development of a skilled and educated labour force and universal access to infrastructure and basic services.
Yet not all aspects of life have benefited. A large proportion (44%) of CEOs believes that globalisation has failed to close the gap between rich and poor, with around a third stating that it has not enhanced the fairness and integrity of global tax systems, and around 30% saying it has failed to avert climate change and resource scarcity issues.
Regarding questions about ‘what the world is coming to’, CEOs are expecting globalisation to fall into decline in the coming period. 75% of respondents expect the world to move towards regional trading blocks, with 83% expecting to see multiple beliefs and value systems. Around 53% of respondents expect the world to move towards nationalism and devolved nations, with 59% expecting a move toward multiple economic models. The internet is one key are in which more free and open access is expected, cited by 72% of respondents.
Related: CEO confidence in business growth drops slightly (2016 edition of PwC's annual CEO Survey).