Why CEOs are optimistic about 2018

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Why CEOs are optimistic about 2018

By Gina Acosta - 01/23/2018

A record-breaking number of CEOs are optimistic about the economic environment worldwide, according to a new report from PricewaterhouseCoopers.

PwC’s 21st survey of almost 1,300 CEOs around the world shows that 57% of business leaders say they believe global economic growth will improve in the next 12 months. It’s almost twice the level of last year (29%) and the largest ever increase since PwC began asking about global growth in 2012.

Specifically, optimism in global growth has more than doubled in the U.S. (59%) after a period of uncertainty surrounding the election (2017: 24%). 

“CEOs’ optimism in the global economy is driven by the economic indicators being so strong. With the stock markets booming and GDP predicted to grow in most major markets around the world, it’s no surprise CEOs are so bullish,” said Bob Moritz, Global Chairman, PwC.

This optimism in the economy is feeding into CEOs’ confidence about their own companies’ outlook, even if the uptick is not so large. About 42% percent of CEOs said they are “very confident” in their own organization’s growth prospects over the next 12 months, up from 38% last year.

In the U.S., after election nerves last year, the early focus on regulation and tax reform by the new administration has seen confidence in business growth prospects for the year ahead rising significantly – from 39% in 2017 to 52% in 2018. And North America is the only region where a majority of CEOs are “very confident” about their own 12-month prospects.

The top three most confident sectors for their own 12-month prospects this year are Technology (48% “very confident”), Business Services (46%) and Pharmaceutical and Life Sciences (46%) – all exceeding the global “very confident” level of 42%.

Strategies for growth remain largely unchanged on last year’s survey – CEOs will rely on organic growth (79%), cost reduction (62%), strategic alliances (49%) and M&As (42%). There was a small increase in interest in partnering with entrepreneurs and start-ups (33% vs 28% last year).

Confidence in short-term revenue growth is feeding into jobs growth, with 54% of CEOs planning to increase their headcount in 2018 (2017: 52%). Only 18% of CEOs expect to reduce their headcount.

Healthcare (71%), Technology (70%), Business Services (67%) Communications (60%) and Hospitality and Leisure (59%) are amongst the sectors with the highest demand for new recruits.

While recent research by PwC showed that workers were optimistic about technology improving their job prospects, CEOs admit that helping employees retrain, and increasing transparency on how automation and AI could impact jobs is becoming a more important issue for them.

Two thirds of CEOs believe they have a responsibility to retrain employees whose roles are replaced by technology, chiefly amongst the Engineering & Construction (73%), Technology (71%) and Communications (77%) sectors. 61% of CEOs build trust with their workforce by creating transparency, at least to some extent, on how automation and AI impact their employees.

“Our education systems need to arm a global workforce with the right skills to succeed," Moritz said. "Governments, communities, and businesses need to truly partner to match talent with opportunity, and that means pioneering new approaches to educating students and training workers in the fields that will matter in a technology-enabled job market. It also means encouraging and creating opportunities for the workforce to retrain and learn new skills throughout their careers. As the interest in apprenticeships and internships shows, lifelong training relevant to a business or industry is critical.”

Despite the optimism in the global economy, anxiety is rising on a much broader range of business, social and economic threats. CEOs are ‘extremely concerned’ about geopolitical uncertainty (40%), cyber threats (40%), terrorism (41%), availability of key skills (38%) and populism (35%). These threats outpace familiar concerns about business growth prospects such as exchange rate volatility (29%) and changing consumer behavior (26%).

Underlining the shift, extreme concern about terrorism doubled (2018: 41% vs 2017: 20%) and terrorism enters the top 10 threats to growth. The threat of over-regulation remains the top concern for CEOs (42% extremely concerned), and over a third (36%) remain concerned about an increasing tax burden.

 

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