Positive indications for Channel Islands’ businesses as PwC Global CEO Survey reveals leap in UK confidence

| January 27, 2014 | 0 Comments
Karl Hairon
  • UK CEOs are among the most confident in the world;
  • Two thirds expect to increase headcount this year, yet three quarters plan to reduce costs;
  • Growth expected in existing markets, but CEOs must also target new global opportunities;
  • Technological advances expected to have greatest impact on businesses over next five years;
  • Overregulation seen as the biggest threat to business.

“Our 2014 Global CEO Survey shows that UK CEOs are far more optimistic about growth prospects than their peers in developed economies around the world, with their views more in line with the CEOs of Asia Pacific countries. UK business leaders are now focused on revival rather than survival but the aim must be to turn this optimism into real economic growth.” – Ian Powell, UK chairman and senior partner, PwC

A marked boost in optimism among UK CEOs making them some of the most confident in the world is good news for local businesses, according to PwC here in the Channel Islands.

Karl Hairon, Partner at PwC CI, said: ‘Although the survey results are based on responses from Global CEOs, our experience is that many of the messages from the survey are relevant to CI business leaders who face similar challenges and have similar opportunities to international firms. The results of the survey are essential reading for all senior staff concerned with strategic direction , profitability, performance and day to day financial management.’

Nine out of 10 (93%) UK CEOs are confident about their own company’s revenue prospects over the coming 12 months, up from 78% in 2013, according to PwC’s 17th Annual Global CEO Survey. UK business leaders are significantly more confident than the average global CEO and also than the vast majority of their European counterparts.

UK CEOs are more confident about the outlook for growth in the global economy than their peers almost anywhere else, with 61% thinking it will improve in the year ahead, up from just one in 10 (11%) last year.

Rising confidence is reflected by a strengthening outlook for jobs. Some two thirds of UK CEOs (65%) plan to increase headcount in their business this year, up from 45% in 2013, and considerably higher than the global average of 50%. Only business leaders in Taiwan, Korea and the Middle East are more likely to recruit.

Ian Powell, chairman and senior partner of PwC UK, commented: “The sharp recovery in confidence in the UK may partly reflect the length and depth of the downturn, with businesses’ pent-up growth potential finally being released. Inevitably any upturn also brings its own challenges, requiring new strategies to make UK businesses fit for the future in a fiercely competitive global market.

“Companies right across the UK are moving beyond the private optimism they’ve been expressing in the boardroom to real activity in the market.”

Optimism about growth opportunities is high, yet challenges remain around successfully gearing up to exploit them. While most UK business leaders aim to increase jobs, almost three-quarters of UK CEOs also intend to implement further cost reductions in the coming year. It appears the shift to a growth agenda does not mark the end of austerity for businesses.

UK CEOs see product and service innovation (48%) as the top way to grow their business over the next 12 months, followed by increasing their market share in existing markets (25%), M&A (16%), and then joint ventures or strategic alliances (16%). Only 5% expect their main growth in the year ahead to come from new geographic markets, well behind the 14% of CEOs worldwide who expect growth to come from new export markets.

Ian Powell continued: “Our findings raise concerns that renewed growth at home may see UK businesses focus on short-term domestic opportunities, and pay too little attention to the longer-term potential of new growth markets. At a time when, for example, China is rebalancing its economy towards consumption and imports, UK business needs to raise its sights and forge new relationships, or face a tough battle to regain lost ground.

“We have many world class businesses across sectors from retail to business services to speciality engineering which are ideally placed to compete on the international stage.”

Turning to the forces that will drive change in their businesses in the coming years, UK CEOs think the disruptive effects of technology have much further to run. 82% rate technological advances as having the greatest impact on their business over the next five years, followed by shifts in economic power (64%) and demographic changes (57%).

57% of UK CEOs say they intend to respond to technological challenges by using data management and analytics, 55% by applying talent, and 53% with technology investments. Most are already making strategic changes to support these areas, with 87% currently engaged in updating their talent strategy (up from 83% last year) and 80% revamping their technology investment plans.

Karl Hairon, Partner at PwC CI, added: “The digital era gives businesses a unique opportunity to reinvent the way they go to market. CEOs need a business fit for the digital age, not just a digital strategy. We’re entering a phase of significant transformation that will continue for several years.”

Asked whether they think their business units are prepared for change, UK CEOs are almost unanimous (97%-98%) that Finance, the Board and the executive team are ready. But they’re less sure about the readiness of Procurement and Risk Management, both at 89%. And only 75% are confident that R&D is ready for change, a concern given that they say product and service innovation is the primary way forward.

Regulation remains a bone of contention for CEOs, not least in the UK. Asked to name the biggest threats to their business, 77% of UK CEOs (against 72% globally) highlight the risk of overregulation. And to improve businesses’ experience of regulation, UK leaders call for regulation that focuses on outcomes rather than processes (57%), a reduction in the total number of regulations (55%), and regulations that are clear and designed for long term (50%).

It is clear that business leaders want the Government to act as an enabler for business. Two thirds (66%) of UK CEOs, against just 41% globally, want the government to focus on the creation of a skilled workforce, reflecting their high level of concern over the availability of key skills. Other priorities for government cited by UK respondents include ensuring the stability of the financial sector (66%), improving the UK’s infrastructure (48%), and creating a more internationally competitive tax system.

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Category: Finance & Business

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