PwC: CEO confidence in business growth drops slightly

25 January 2016 Consultancy.uk

Confidence of CEOs globally regarding business growth has dropped slightly from 39% in 2015 to 35% in 2016, PwC's 19th annual CEO confidence survey highlights. Geopolitical concerns as well as regional economic disruption are of chief concern among CEOs, while continued regulatory pressure and potential key skill shortages are also affecting levels of CEO poise.

Seven years on from the financial crisis, uncertain times still hold across the global economy. In this year's PwC CEO Survey, titled 'Redefining business success in a changing world', the consulting firm explores global CEO sentiment to a range of factors affecting their confidence, as well as a number of key themes related to the changing social and technological environment. According to the survey, CEOs are worried.

PwC's research for the report involved interviews with 1,409 CEOs from 83 countries. The surveyed CEOs have been selected on the basis of providing a fair representation of all the major regions and industries in the world. The interviews were for the most part (60%) conducted online, with 26% through the telephone and 14% by post. Of the companies surveyed, 38% have revenues of between $100 million and $1 billion and 28% have revenues of up to $100 million; 60% of companies are privately owned and 38% of companies are listed on at least one stock exchange.

CEO uncertainty
The survey highlights that the number of CEOs very confident in business growth prospects has been tracking downwards, from 48% in 2011 to today's 35%. In addition, the percentage of CEOs confident that global economic growth will improve has also seriously deteriorated in recent years, from a high of 44% in 2014 to 27% this year. There are a number of factors affecting CEO confidence. China remains a key player in the growth plans of many of the CEOs surveyed, yet its recent stock market wobble, its debt-laden local governments and its faltering manufacturing sector continue to spook investors and rattle a number of industries. The commodity sector in particular is under pressure from the slowdown, as among others oil prices have nosedived - throwing many oil producer economies into turmoil. 

Whereas the global growth picture remains uncertain, the companies individually are more confident about their own prospects for revenue growth in the coming year, although it too has fallen somewhat on recent years. Just over a third (35%) of CEOs say that they are 'very confident' about short-term business growth compared to 39% last year. The CEOs tend to cite the US and China as their main vehicles for the growth, and to a lesser extend Germany and the UK.


Global trends
Looking at global trends of CEO concerns for the coming years little has changed since last year. Over-regulation comes in at number one, with extreme concern voiced by around 40% of CEOs and somewhat concerned by a further 39%. This is followed by geopolitical uncertainty, about which 74% of respondents is at least somewhat concerned. Exchange rate volatility comes in at number three at 73% at least somewhat concerned and the availability of key skills at number four with 72%. Government response to fiscal deficit and debt burden rounds off the top five with 71% of CEOs citing it as a concern.

Up and coming
In terms of concerns rising the fastest in recent years, bribery and corruption is up from 41% in 2013 to 55% this year, while lack of trust in business - following major business frauds including the Libor rigging scandal, the VW emission fraud and horse meat additions - has increased from 37% in 2013 to 55% today. Social instability too has, since its addition to the ranking in 2015, seen an increase, now at 65%, while consumer spending and behaviour is seen as a risk by 60% of those surveyed, up from 49% in 2013.


Regional outlook
The research shows that there are considerable regional variations. In the Middle East geopolitical uncertainty is almost a ubiquitous concern among those surveyed with 94% at least somewhat concerned. In the African region exchange rate volatility comes in at 87%, while the Central and Eastern Europe continue to be plagued by regional geopolitical concerns. Latin America respondents remain concerned about exchange rate volatility at 85% and North American respondents report increasing tax burdens as their top concern. Over-regulation is cited by Western European respondents as the greatest concern, while exchange rate volatility and the availability of key skills comes joint first in the Asia Pacific region at 81% of respondents highlighting it as at least somewhat concerning.

Industry outlook

Respondents from different industries also highlight different concerns affecting their specific industries. The energy sector for instance cites geopolitical uncertainty as its biggest concern at 89%, while the concern is the lowest for the healthcare sector. Over-regulation is the biggest concern for the insurance industry at 94% of respondents, while the least concerning for business services and the tech and manufacturing industry. The availability of key skills is a major concern for the entertainment and media industry at 88% of respondents, and is of least concern in the mining industry. Social instability would hit the hospitality and leisure industry the hardest, while asset management finds this of the least concern. The high speed change in technology is of considerable concern to the banking and capital markets, at 81% and of least concern to mining at 31%.

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