Year begins with dip in business optimism

Deloitte CFO

A survey by Grant Thornton on global business optimism finds that 38% of European businesses are beginning 2016 in positive mood. This is slightly ahead of the net global figure of 36%, down slightly from the third quarter of 2015.

However, the professional services firm’s survey of more than 10,000 companies worldwide shows much higher levels of optimism among companies in the UK and Ireland, despite the likelihood of a referendum later this year on the UK’s continued membership of the European Union (EU).

Eighty-eight per cent of Irish firms participating in the latest survey and 73% of those in the UK believe that their prospects for British exports and profitability over the year ahead are favourable. “In many ways, the UK’s optimism is testament to the new-found resilience of our economy in light of the myriad challenges it has faced over recent years,” said Robert Hannah, chief operating officer (COO) at Grant Thornton UK.

Commenting on the feedback from European companies, Ed Nusbaum, global chief executive at Grant Thornton, said: “The resilience in the EU business community is remarkable when you consider the potential social and political flashpoints.

“The migrant crisis is yet to be resolved, and the threat of terrorism remains very real, while one of its leading members could vote to leave this year. Yet businesses are shrugging that off and thinking longer-term. Investment in research and development is set to rise.”

However, by contrast the number of US companies that regard their business outlook as positive fell from 74% in the third quarter of 2015 to 50% in Q4, the biggest fall in optimism of any of the 36 countries surveyed.

The fall partly reflects the fact that US companies correctly anticipated last month’s increase in interest rates by the Federal Reserve, the first since 2006, which is seen as likely to strengthen the dollar and make American exports more expensive.

“In 2016, US exporters will need to compete hard to win contracts for their goods and services in overseas markets,” said Nusbaum. “The flip side of the strong dollar is that it will increase the appetite of the US consumer for cheaper imports.”

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