Business leaders report strong increase in optimism heading into 2017
The findings, from Grant Thornton's most recent quarterly global survey of 2,600 businesses in 37 economies, suggest that business leaders are putting a period of uncertainty around many major issues behind them. And while pockets of difficulty remain, the findings show that businesses are entering this year in a positive frame of mind.
Research from the Grant Thornton International Business Report reveals that, globally, business optimism at the end of Q4 2016 stands at net 38%. This is an increase of 5pp from Q3 and the highest level since Q3 2015. In the US, optimism has increased from 43% to 54% – and the trend is repeated around the globe. The world's two other big economic blocs, China (30% to 46%) and the EU (28% to 34%), have reported similar jumps.
Francesca Lagerberg, global leader at Grant Thornton, commented "We have clients in over 140 countries and from conversations with our people, can say that uncertainty was the business buzzword of 2016, and much of that came from Brexit and the US presidential election. That uncertain period is now reduced, and knowing the results will allow businesses to have a clearer steer on such key issues such as taxes, jobs and trade policy."
"Looking to the year ahead, we don't know what exactly will come out of Washington, or what shape the Brexit negotiations will take, or how trade partnerships across Asia will evolve."
"There's also evidence that European firms have an eye on the impact elections in countries including France and Germany might have on the Euro, as exchange rate concerns have ticked up. But for the most part, business leaders are shrugging it off, having a bit more clarity than they had three months ago during our last global survey. They know that Brexit is happening, they know the identity of the US president, and with those questions answered they start 2017 in a positive state of mind. That is evident in investment and revenue expectations too."
Strong fundamentals underpin the rise in optimism
Findings from Grant Thornton's IBR reveal that strong fundamentals are underpinning the rise in optimism. Globally, the proportion of firms expecting revenue to increase in 2017 has gone up by 5pp to net 50% – the highest figure in nearly two years. China (+14pp) and the US (+11pp) reported strong swings in revenue expectations in Q4. The global outlook for selling prices (+13pp) and profitability (+4pp) is equally strong, and plans to invest more in plant & machinery are also at a two-year high (33%).
IBR also reveals that the picture is not entirely positive
Business optimism in Mexico has fallen to just 8% in Q4 – the lowest quarterly figure it has ever recorded. In Russia, optimism has fallen 13pp to -7% (more pessimistic than optimistic). Business leaders in the developed APAC economies (down from -8% to -16%) are also markedly more pessimistic. In addition, the proportion of firms in the EU citing exchange rate fluctuations as a constraint on growth has increased by 8pp to 21%, as elections in France and Germany have the potential to cause market uncertainty.
Dynamic businesses that think long-term will be the 2017 winners
There will be challenges in 2017, but that shouldn't mean that growth plans should be abandoned. It may be investing for greater efficiency, hiring new skilled workers, or researching new markets or services. But those dynamic businesses with the ability to think long-term and focus on their operations will be the big winners.
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