Saturday, March 14, 2009

Business Confidence Remains Weak

Much attention is placed on consumer confidence since consumers have accounted for 70% of GDP over the course of the recent past. As important though is the confidence CEOs see in their business and the economy.

The accounting firm, PriceWaterhouseCoopers, has conducted a survey of global CEOs over the past 12 years. In this year's survey completed in December of last year some important results are reported. PwC notes:
CEOs around the world are retrenching, indeed many claim to be entering ‘survival mode.’ Our 12th Annual Global CEO survey shows how the financial crisis shattered short-term confidence. The percentage of CEOs who were ‘very confident’ about their one-year revenue growth prospects dropped to 21%, the lowest level in six years. Uncertainty about the future is still running high and confidence no doubt continued to deteriorate after we completed the survey in early December.
Following are a few findings from the survey.
  • Q: How would you assess your level of confidence in prospects for the revenue growth of your company over the next 12 months?
  • Q: How would you assess your level of confidence in prospects for the revenue growth of your company over the next 3 years?
business confidence long term
And a look at the impact on confidence over a shorter time frame.

(click to enlarge)

business confidence short termThis lack of confidence about future business prospects is leading firms to delay planned investments.
Nearly 70 percent of CEOs say that their companies will be affected by the credit crisis. Of those, nearly 80 percent say that they face higher financing costs, and nearly 70 percent say that they will delay planned investments as a result. Companies in the banking, utilities, construction, entertainment and automotive sectors are most likely to be affected.
The lower level of confidence has led to staff reductions. On the positive side, it appears firms are reducing the prospects for additional staff reductions. Keep in mind this survey was completed in December and the early part of 2009 may have changed company thoughts on the staffing issue.
  • Q: What do you expect to happen to headcount in your organisation globally over the next 12 months?
CEOs expectations for future staffing reductionsIn addition to Washington paying attention to consumer confidence, policy makers will need to focus on the confidence business executives have in the prospects for their businesses.
  • Q: How important are the following aspects of a country’s tax regime at influencing your investment decisions?
(click to enlarge)

importance of clarity on taxes
The uncertainty around taxes and regulation do contribute to the lower confidence level experienced by the CEOs of global businesses.


12th Annual Global CEO Survey: Redefining Success (pdf)

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