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With their worst fears of prolonged recession behind them, chief executives’ confidence for future growth has bounced back from the gloomy prospects of a year ago, according to the 13th Annual Global CEO Survey released by PricewaterhouseCoopers at the World Economic Forum in Davos
This rising confidence has translated into a planned boost in recruitment, with nearly 40% of CEOs expecting to increase their headcount this year, contrasting with 25% of CEOs planning job cuts over the next year, down from nearly half who decreased headcount in the past 12 months.
In Asia Pacific and Canada about half of CEOs are looking to increase employment in 2010, and this figure leaps to over 60% in Brazil. Nearly a fifth of UK CEOs say they expect their headcount to rise by more than 8% in 2010.
Overall, the survey found that 81% of CEOs worldwide are confident of their prospects for the next 12 months, while only 18% said they remained pessimistic. The results compare with 64% who said they were confident a year ago and 35% who were pessimistic, while 31% said they were now "very confident" of their short term prospects, up 10 percentage points from last year.
The survey revealed striking differences in confidence levels among CEOs in emerging economies and those in developed nations. In North America and Western Europe, about 80% of CEOs said they were confident of growth in the next year, compared with 91% in Latin America and in China/Hong Kong, and 97% in India.
Looking at the longer term, the results were more even. Overall, more than 90% of CEOs expressed confidence in growth over the next three years. Those results, coming at the start of a new decade, were about on par with confidence levels of CEOs in PwC’s 2000 survey. But ten years ago the economic split was very different, with 42% of North American CEOs extremely optimistic – twice as many as in Asia.
For the future, a total of 60% of CEOs said they expect recovery in their national economies only in the second half of 2010 or later, while 13% said recovery was already underway, and 21% said it would set in during the first half of this year. Return to growth was fastest in China, where 67% of CEOs said recovery had begun in 2009. However, nearly two-thirds of CEOs in the US and more than 70% in Western Europe said the turnaround would not begin until the half of 2010.
"The fears of a global economic meltdown have receded and CEOs are more upbeat about their prospects," said Dennis Nally, Global Chairman of PricewaterhouseCoopers. "CEO confidence is tempered, however, by the slow pace of recovery and the impact of often drastic cost-cutting and other steps taken to survive the downturn. The emerging economies are clearly recovering at a faster pace than those that are more developed. Companies with the best prospects for early recovery are those who managed through the recession while keeping an eye to the recovery ahead.”
“In some fast-growing economies the turnaround is well under way; but CEOs in the countries hardest hit by the crisis see its effects remaining through 2010 and beyond. CEOs must now shift their mindset to making strategic decisions about investing in growth in order to gain competitive advantage.”
Fears for the future
According to other key findings of the 13th Annual PwC Global CEO Survey, protracted global recession remains the biggest overall concern of CEOs around the world (65%), followed by fear of over-regulation (60%). More CEOs are "extremely concerned" about over-regulation (27%) than any other threat to business growth.
Other high-ranking potential business threats included instability in capital markets, and exchange rate volatility. At the other end of the spectrum, concerns over terrorism and infrastructure were cited by less than a third of CEOs globally as threats to growth.
Public trust and consumer behaviour
Over one in four CEOs believe their industry’s reputation has been tarnished by the downturn. However, 61% of CEOs in the banking and capital markets sector said there has been a fall in trust in their industry.
Nearly half of CEOs are concerned that the recession caused a permanent shift in consumer behaviour. Most say that consumers will place greater importance on a company's social reputation (64%), spend less and save more (63%), or be more active in product development (60%).
Risk management
Risk management took on greater importance among CEOs as a result of the recession. Forty-one per cent of CEOs plan to make major changes to their company’s approach to managing risk, and another 43% report plans to make some change to their processes
Boards of directors are becoming more engaged in key aspects of management; such as assessing strategic risk, monitoring financial health, and overseeing company strategy.
