Optimism about global economy sees UK CEO confidence soar

The number of UK CEOs expecting the global economy to improve over the coming year has more than doubled, according to PwC’s 21st annual CEO Survey published at the World Economic Forum in Davos.

According to business services giant PwC’s CEO survey, which quizzed nearly 200 British bosses, more than a third (36 per cent) believe worldwide economic growth will improve in 2018. That compares with 17 per cent last year and represents a level of confident not seen since 2015.

Almost nine in 10 (88 per cent) UK CEOs are optimistic about their organisation’s growth prospects for the next 12 months (89 per cent in 2017), broadly in line with global counterparts (87 per cent).

Given Brexit negotiations only recently reached a significant milestone, it is unsurprising that the number of UK business leaders who describe themselves as ‘very confident’ has dipped to 34 per cent from 41 per cent last year.

Confidence among business leaders is even higher about growth prospects over the next three years, with 96 per cent expecting their revenue to increase - higher than the global figure of 91 per cent. This may reflect comfort in the prospect of a two year Brexit transition period, despite uncertainty over the outcome of trade negotiations.

Despite Brexit uncertainty, global CEOs identify the UK as the fourth most important country for their businesses’ growth, behind the US, China and Germany. For UK CEOs, the US remains the top overseas market, followed by Germany and China, a reminder that CEOs see opportunity beyond Europe.

Kevin Ellis, chairman and senior partner of PwC, said: “Robust confidence levels among UK CEOs points to resilience in uncertain times, but this is tempered by a big dose of realism about the challenges ahead. Brexit uncertainty, regulation, availability of skills and cyber are key concerns but business leaders remain confident they can navigate through them.”

While optimism remains high, the PwC CEO Survey findings suggest businesses are braced for more challenging times ahead. The UK has been a great job-creating engine in recent years with record levels of employment. However, the number of UK business leaders expecting to increase headcount has fallen slightly to 54 per cent from 63 per cent last year, and 15 per cent expect to reduce headcount, compared to 10 per cent in 2017.

UK and global CEOs share the same top two concerns about the biggest economic or policy threats to their company’s growth - geopolitical uncertainty (83 per cent UK; 85 per cent globally) and over-regulation (80 per cent UK; 83 per cent globally). This is a change to 2017 when UK business chiefs viewed uncertain economic growth and exchange rate volatility as their top two concerns.

Cyber threats and the availability of skills remain the top business concerns for UK CEOs. Rising employee and benefit costs have overtaken changing consumer behaviour, which was in last year’s Top 3 but remains a threat to 63 per cent of UK CEOs.

UK CEOs are acutely aware of the disruption emerging technologies, such as AI, blockchain and robotics, could cause, with 69% agreeing emerging technology and automation will disrupt their business over the next five years.

Ensuring they can attract and develop the right talent is a top priority for 83 per cent of UK CEOs, compared to 80 per cent globally. 77 per cent say they are improving compensation and benefit packages to attract or develop people with digital skills. 62 per cent of UK CEOs don’t believe they currently have sufficient digital skills amongst their workforce and 53 per cent are concerned about the availability of skills more generally.

Upskilling existing employees is as vital as creating the next generation of tech talent. More than half of UK CEOs (58 per cent) recognise they have a responsibility to retrain employees whose tasks and jobs may be impacted by automation. 38 per cent of UK business leaders believe it is difficult to attract the right kind of digital talent, and are taking practical steps to address this issue. 63 per cent are using or plan to use apprenticeships and internships to grow their workforce, while developing the skills they need for today and tomorrow.

Kevin Ellis, chairman and senior partner of PwC, said: “Disruption from emerging technology is now a fact of life and business leaders are considering how the fourth industrial revolution will impact their operations and employees. At the same time, they also have the day-to-day demands of managing costs and growing their businesses. How UK businesses respond to these short and long term opportunities and challenges will determine their own and the UK’s future success.

“Business and Government have the opportunity to work together to help current and future employees develop skills that keep pace with technological change. Creating the next generation of skilled workers as well as attracting and retaining tech talent will be essential in a post-Brexit world. Many CEOs are already focused on modernising working environments, introducing flexible working and implementing continuous learning and development programmes. The more that UK CEOs take the lead and innovate, the greater the likelihood that the UK will maintain its competitive position on the international stage.”