Grant Thornton: European business confidence on rise

Confidence of mid-sized business leaders in the wider European area is on the rise as growth prospects improved across the region, a recent survey by Grant Thornton finds. Especially leaders in Ireland and the Netherlands are confident about the future. The UK is found among the countries where confidence has dropped.  The biggest threats are said to come from high unemployment, deflation and the rise of nationalism in the wider EU area.

In Grant Thornton’s recently released international business report, titled ‘The future of Europe’, the consultancy interviewed 1,173 CEOs, Managing Directors, Chairmen and other senior decision-makers from all industry sectors in mid-market businesses (50-499 employees) about the current and projected business environment in Europe.

Economic development
With seven years now since the financial crisis, Europe has seen a number of lacklustre growth years, with in 2013 the European Union (EU) up the barest slither of 0.1%. Last year however met with a considerably better performance for the EU, posting solid 1.4% growth. The Eurozone too has improved somewhat last year, growing by 0.9% after contracting 0.5% a year earlier. 2015 rates for 2015 are higher, with the EU up to 1.8% growth and the Eurozone to 1.5%

The star performer in 2014 in Europe was Ireland, with its economy surging 4.8%, driven by a 12.6% increase in exports – with a projection of 3.9% annual growth in 2015. Poland too continues to be a growth motor for wider Europe, growing at 3.3% last year and expected to hit 3.5% this year. The UK continues to post modest growth, at 2.6% in 2014 and 2.7% projected for this year. Outside the EU, Turkey too has showed modest growth last year, up 2.9% and is expected to grow by 3.1% this year. Spain and Greece are expected to do relatively well in 2015, with both posting projected growth of 2.5%.

Last year continued to see the three major economic powers in the region post lacklustre results. Germany grew by 1.6% and is expected to do the same this year, which is far lower than its 3.8% growth in 2011. While France grew 0.4% last year - a rate it has been at for the past three years, - however is expected to grow by 1.2% this year. Italy will climb up from contracting -0.4% last year to 0.5% growth this year.

Economic outlook
Business leaders see considerable potential in many European countries with confidence in the EU running at 38%, and in the Eurozone at 34%. Particularly Irish business leaders continue to be very confident in the general business environment, up from 86% last year to 92% this year; with 66% expect to see profits rise over the next 12 months. Dutch business leaders are too expecting a good year ahead, with 78% expressing confidence – up 31% on a year before. Spain too has seen resurgence in confidence, up 30% to 52% this year – with 32% of Spanish businesses expect to add jobs over the next 12 months.

Although UK leaders too remain relatively confident, with 65% expressing confidence, they are among the leaders which are less confident this year, with a drop of 14%. Business confidence in Poland has also deteriorated since last year, down 15% to 24%, as has it in Sweden, down from 19% to 4%. France is slowly coming out of the doldrums, with confidence up 12% to -15%.

Business threats
The report also considers the threats to the business environment in Europe, finding that while there is a general improvement to sentiment across the region with modest growth for many of the economic players, certain headwinds remain. The biggest threat to the economic stability of the EU as seen by the Eurozone leaders is unemployment, cited by 25%, followed by low growth (23%) and high levels of national debt (20%). For leaders wider Europe leaders, the biggest threat experienced are high levels of national debt, cited by 30%, followed by the rise in popularity of nationalist political parties (24%) and high employment (17%).

In terms of local response, high unemployment, the survey found, remains a threat for a number of regions, with Spanish leaders’ concern running at 45% and Italy at 44%, while only 11% of UK leaders raise unemployment as a concern. Low growth was too raised as a persistent issue by respondents, with particularly the Baltic respondents citing concern, Estonia (48%), Lithuania (32%) and Latvia (26%), as well as France (31%). National debt levels too remain an issue for many respondents, with UK respondents’ concern runs at 32% while German concern runs at 25%.