CEO Confidence Plummets to New Low
View this page in: Français, NederlandsCEO Confidence Plummets to New Low
Most Top Executives Expect Slow Turnaround
Depth of the Crisis Impacts all Regions, Sectors
Talent, over-regulation among top concerns in PricewaterhouseCoopers Survey
DAVOS, Switzerland - 27 January 2009
Battered by recession, CEOs' confidence about future prospects for business has plummeted and executives expect a slow, gradual recovery over the next three years, PricewaterhouseCoopers 12th Annual Global CEO Survey has found.
CEO confidence plunged to its lowest level since 2003, when PwC began tracking CEOs' forecasts. Worldwide, just 21 percent of CEOs said they were very confident of revenue growth in the next 12 months, down from 50 percent in last year's survey. And more than a quarter of CEOs said they were pessimistic about prospects for the coming year. The survey results were released today at the World Economic Forum annual meeting in Davos, Switzerland.
CEOs worldwide were also gloomier about longer term growth as well, predicting a slow recovery. Only 34 percent said they were very confident of growth over the next three years, down from 42 percent last year, when CEOs were just beginning to recognise the full impact of the credit crisis on the global economy. Illustrating the changing mood, CEOs confidence worsened over the course of the surveying as negative economic news unfolded.
Pessimism prevailed across all geographic regions, business sectors and levels of economic development, the survey found. Only 15 percent of CEOs in North America and 15 percent in Western Europe expressed confidence about growth prospects for the next 12 months. This compared with 21 percent in the emerging economies of Central and Eastern Europe, 31 percent in Asia Pacific, and 21 percent in Latin America.
"The speed and intensity of the recession has rocked the psyches of CEOs and created a global crisis of confidence,” said PricewaterhouseCoopers' Global CEO Samuel A. DiPiazza, Jr. "CEOs are most concerned about the immediate survival of their companies. Even in once rapidly emerging economies, companies are now coping with issues like unavailable credit, sluggish capital markets, and collapsing demand.
"The severity and duration of the recession are difficult to predict and CEOs are balancing the challenges of successfully managing through the downturn while also remaining prepared for economic turnaround. Their prospects for recovery are truly connected," he added.
The impact of the recession in the world's major economies, cited by 85 percent of survey respondents worldwide, continued to dominate concerns of CEOs and was the only risk factor to increase among CEOs' concerns. Other major risk factors included disruption in the capital markets, cited by 72 percent, over-regulation, 55 percent, energy costs, 50 percent, and availability of key talent, 46 percent.
Further highlights of the survey results:
Banking Crisis Pervasive
CEOs expect the worldwide banking crisis to have a broad impact on business, affecting companies across all geographic regions and business sectors. Nearly 70 percent of CEOs said their companies will be affected by the credit crisis. Of those, nearly 80 percent said they faced higher financing costs, and nearly 70 percent said they would delay planned investments as a result. Companies in the banking, utilities, construction, entertainment and automotive sectors are most likely to be impacted, CEOs said.
Those CEOs whose companies were anticipating growth said they would fund it primarily thorough internal cash flow, followed by the debt and equity markets.
Long-term Factors Remain on the Agenda
Despite the severity of current economic conditions, CEOs continued to be concerned with long term needs. Access to key talent remained a vital concern; only 26 percent said they planned to reduce headcount in the coming year, while 35 percent planned to maintain staffing levels.
Moreover, 72% of CEOs predicted that the pressure on natural resources will worsen in the future. Respondents said that dependence on carbon-based energy cited by 61 percent, climate change 56 percent, overpopulation 55 percent, and scarcity of fresh water, 50 percent, will have an impact on long-term success.
About 75 percent of respondents said they are already responding by developing new products and services and by making changes to their operations. More than half expect to make a return on those investments in the next 12 months.
JVs to overtake cross-border M&A Activity
The percentage of CEOs who believe that Joint Ventures (JVs) will play a greater role than M&A in cross-border growth has surged, particularly in Western Europe and Latin America. This may reflect the lower cost and risk level associated with JVs, as well as the increasing popularity of collaboration to deal with the challenges of cross border growth.
However, merger and acquisition activity has decreased. Only 20 percent of respondents said they had completed such a transaction last year. The decline in M&A was most pronounced in emerging economies in Asia and Eastern Europe. Cultural differences, unexpected costs and delivering deal value were the three most common concerns of CEOs in considering M&A.
Energy and Talent Present Challenges
Buffeted by the recession and volatile commodity and energy costs, CEOs from all regions of the world said they were seeking to sustain their businesses and prepare for economic rebound. Overall, more than 80 percent said they were taking steps to reduce energy costs by finding efficiencies in their operations, and more than half said they were seeking alternative energy sources. Companies were also investing in technology to reduce energy dependence and trying to secure future energy supplies.
Finding and retaining top talent also remains a major priority for CEOs. A shortage of candidates with essential skills was cited as a key challenge by nearly 70 percent of respondents. Other human resource concerns included recruiting and integrating younger employees, providing attractive career paths, and competition for talent within their sector. CEOs cited strategies such as creating more flexible work environments, redeploying key employees and participation in social activism as means to overcome talent challenges.
Better Information Needed to Manage Risk
CEOs recognised a huge gap in the information required to manage risk, and fuel long-term success. While 92 percent said information about risk is important, only 23 percent said they received comprehensive information about it. In addition, just 21 percent get comprehensive information about the needs and preferences of customers and clients.
The ‘regulation paradox’
CEOs said they recognise the need to collaborate with government to address systemic problems. Yet, while 55 percent of CEOs remain concerned about overregulation as an obstacle to growth, nearly half also said their governments have not done enough to create a skilled workforce, and 38% said governments could do more to improve infrastructure. Likewise, more than 80 percent of CEOs favoured clear, consistent government policies to address climate change, but just 28 percent believe that their governments have such policies.
Survey Methodology
For the PricewaterhouseCoopers 12th Annual Global CEO Survey, 1,124 interviews with CEOs were conducted in 50 countries during the last quarter of 2008. The majority of interviews were conducted by telephone. The research was coordinated by the PricewaterhouseCoopers International Survey Unit, Belfast, Northern Ireland, in cooperation with project managers and a global advisory board of PwC partners. By region, 500 interviews were conducted in Europe (Austria, Belgium, Czech Republic, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden, Switzerland, Turkey, UK, Ukraine), 276 in Asia Pacific (Australia, China/Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Singapore, Taiwan, Thailand, Vietnam), 168 in Latin America (Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, Venezuela), 138 in North America (US, Canada), and 42 in the Middle East and Africa.
A full copy of the report can be found at: www.pwc.com/ceosurvey, or can be obtained on simple request:
- For journalists: Elsie Van Linthout of Luna, +32 (0)2 658 02 70 or elsie@luna.be;
- Other: Saskia Rademakers, PwC Belgium, +32 (0)2 710 72 48 or saskia.rademakers@pwc.be
- Rogei Heijens
- Chairman
- Tel: +32 (0)2 710 4606
- Saskia Rademakers
- Director Marketing & Communication
- Tel: +32 (0)2 710 72 48
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