7 out of 10 Belgian CEOs say prospects gloomy for economy

Uncertainty greatest among western European managers

Nearly half (48%) of the 1,258 CEOs polled worldwide believe the global economy will decline even further in the next 12 months. This is a conclusion from PwC’s 15th Annual Global CEO Survey, the results of which are announced today at the World Economic Forum in Davos. Just 15% of the CEOs surveyed think that the worldwide economy will see growth, a stark contrast to last year’s survey, in which no fewer than 48% said they were ‘very confident’ of the prospects for growth. Belgian executives anticipate the future with even more foreboding than their colleagues elsewhere, if that were possible: as many as 62% expect the world economy to slump even further, with only 3% seeing any improvement in the economic situation.

It is interesting to note that 40% of CEOs worldwide are more confident in their own company’s growth prospects than in the outlook for the economy as a whole. This suggests that, since the 2008 crisis, executives believe they’ve learned how to manage through difficult, volatile economic times. Four out of 10 CEOs are ‘very confident’ of revenue growth for their companies, down slightly from 48% last year, though still up on the 31% figure in 2010. Here, too, CEOs in Belgium display more reticence: 12% say they are ‘extremely confident’, but by far the biggest group (47%) expresses a somewhat more cautious view. For instance, Belgian executives predict greater strategic changes than their foreign colleagues. The most important reasons for these alterations in strategy in Belgium are pressure from the competition, the impact of government debt, a shift in risk tolerance and the availability of talent.

The survey also reveals that over half of CEOs worldwide expect to increase their workforce over the next 12 months. Though the precise figures vary according to sector, globally it seems that the biggest wave of recruitment is expected in entertainment and the media. In Belgium, recruitment plans are significantly more modest for the coming year. Only 21% of CEOs are thinking of hiring extra staff and 32% reckon that their payroll will remain stable. In this regard, Belgian executives are generally more pessimistic than managers in The Netherlands and Germany. For reasons to do with the talent challenge, many more Belgian CEOs would sooner physically move their operations than enter into partnerships to stop the gap.

Confidence down most in western Europe

The drop in confidence in economic growth prospects is biggest in western Europe. Which hardly comes as a surprise given the continuing crisis with the euro. Only a quarter of European executives are ‘very confident’ of the growth prospects, a sharp decline from last year’s figure of 40%. With figures of 12 and 13%, respectively, Belgium and The Netherlands score significantly lower than Germany, whose 47% figure is the exception within Europe.

The short-term prospects are also less promising according to CEOs from the Asia-Pacific region, where confidence fell from last year’s 54% to 42% this year. Above all, China has seen a big decline: 51% of CEOs there are ‘very confident’; last year’s figure was up at 72%. A similar trend can be seen in India. Whereas the last survey revealed that 88% of managers there were ‘very confident’ in the short-term growth prospects, that figure is down at 55% this year. In the USA, as well, a slight fall can be perceived (from last year’s 45% to 41%). Africa is the only continent where CEOs’ confidence appears to be on the up: 57% expect growth, a rise of 7 percentage points year on year.

Elsewhere, longer-term confidence is also on the wane. 46% of CEOs say that they are ‘very confident’ of revenue growth over the next three years, a drop of 5 percentage points. Here, too, confidence is at its lowest among CEOs in western Europe. In Belgium, we even see that no more than 21% are ‘very confident’ of the growth potential in the medium term.

What keeps Belgian CEOs awake at night?

The burden of debt and the shortfalls in tax revenue are the biggest concerns of Belgium’s chief executives (68%). 65% are apprehensive about the uncertain growth prospects. The list is topped off with the instability of the financial markets (50%), regulatory change (41%) and exchange rate volatility (29%). Belgium’s executives are far more concerned about the rising tax burden than their German and Dutch neighbours, though their concern is on a par with the European average. Dutch CEOs are far less worried about the many looming threats than their Belgian or German colleagues.

“Not just here but across the rest of the world, CEO confidence has taken a hefty thump,” says Karel De Baere, Chairman of PwC Belgium. “The aftershocks of the financial crisis are still being felt. They’re very concerned about global economic uncertainty and the sluggish pace of economic recovery. The cautious optimism that briefly showed its head after the crisis has virtually dissipated.”

According to De Baere, confidence in global economic growth is further impaired by the continuing sovereign debt crisis in the EU and other economic uncertainties. “We are now even seeing that tiger economies in Asia and Latin America are not immune to the inexorable economic stagnation. Every CEO in the world is clearly worried about the health of the global economy. In the past few years, we have seen how the emerging economies continued to do well whereas established economies in Europe and elsewhere suffered badly during the crisis. We’re now seeing that that holds less true than was previously the case.”

“One positive note is that CEOs have learned from the difficult economic situation over the last few years are now better equipped to efficiently pilot their businesses through the economic maelstrom. They now have a better idea of how to deal with an economy characterised by market volatility, a slump in demand in the developed economies and greater uncertainty in growth nations. Worldwide, 40% of CEOs are convinced that they will achieve their growth objectives in spite of the adverse circumstances. But this optimism is not so buoyant in all quarters. If we look at Belgium, we see that 47% of CEOs express somewhat more measured confidence in any chances of growth,” says De Baere. Belgian CEOs also anticipate more cost-savings, outsourcing and disinvestment in 2012 than their neighbours in Germany and The Netherlands.

Where do the growth opportunities lie?

The 15th Annual Global CEO Survey shows that managers still regard the emerging economies as an important pool of growth. Worldwide, 59% of CEOs consider those growth markets to be much more important for their company’s future than the more developed, established economies. Overall, the BRIC nations (Brazil, Russia, India and China) continue to be the top growth markets, followed by the USA and Germany. For Belgian CEOs, the greatest growth potential lies closer to home in the first instance: 38% of them look to opportunities in France, followed by Germany (26%) and only then China (21%).

In 2012, CEOs worldwide are first and foremost looking for growth by extending their market share in existing markets and developing new products and services. In Belgium, this last aspect scores highest (47%) and bolstering market share comes second with 24%. Penetrating new markets, mergers and acquisitions plus joint ventures and alliances as a growth strategy straggle along in last place here as in the rest of the world. In other words, Belgian executives are less keen on strategic cooperation with third parties: only 3% see joint ventures and alliances as a growth factor.

The talent challenge

As mentioned above, something over half of CEOs worldwide predict a rise in their workforce, in spite of the economic downturn. Again, as stated above, recruitment plans are a little more modest in Belgium. Here, it’s even so that 41% of the executives polled think that they will have to shed personnel in 2012.

However, finding, attracting and retaining the right talent continues to be one of the biggest challenges for many a CEO.  Worldwide, only a third of CEOs are very confident that they’ll also find that talent. Here at home, a paltry 18% of executives share that confidence. In Belgium, finding qualified staff appears to be the hardest nut to crack: no fewer than 59% of Belgian CEOs (around twice the global figure) identify this as their biggest challenge.

“Our country has a whole range of occupations for which there is a shortage of candidates and we’ve known for some time that Belgian companies have a hard job finding well qualified employees,” says Karel De Baere. “Here, the government has an important part to play. Our education system has to focus on better training for technical staff – which still seem to be difficult to find.”

The lack of the right talent is also felt by many executives as posing one of the most ominous threats to possible growth. This is a feeling endorsed by more than half of CEOs worldwide and by 47% of Belgian CEOs. Other major threats to growth in the minds of Belgian CEOs include tax hikes (53%), changes in patterns of consumption (56%), rising energy costs (35%) and the inability to finance growth (32%).

Nearly three-quarters of CEOs worldwide and 62% of executives here in Belgium expect to introduce a shift in their strategy in relation to talent management over the coming 12 months. This makes talent mentoring and development an absolute priority for business change for the second year in a row. Nearly 7 out of 10 CEOs (as against 53% in Belgium) even say that they would like to devote more time to developing leadership and talent within their business.

“It’s ironic and sad to have to conclude that, now that our economy is have such a hard time of it, a want of qualified staff is holding back growth.  CEOs have a tough job finding and retaining the right personnel and staff turnover is big in the growth economies. The problem is likely set to get worse as global demographic patterns continue to change. In our country as well, the challenge will not get any less, given the ageing society,” concludes De Baere.