A report by Grant Thornton has revealed record levels of optimism among global businesses but also contains a warning that a lack of skilled workers is hitting confidence and could threaten growth.
The latest International Business Report (IBR), a survey of 2,500 businesses in 36 economies, also found increases in revenue and profitability expectations.
The IBR findings show that global business optimism hit an all-time quarterly high of 51% in the second quarter of this year, representing five consecutive quarters of increases in optimism. Healthy confidence was particularly evident in the US, where optimism hit an all-time high of 81%, in the EU, which has jumped to a two-year high of 50%, and in China, where optimism remains at 48% - a near three-year high. Underpinning this, global revenue expectations also equal the all-time quarterly high of 56%, as do expectations around increased profitability.
However, during this quarter the percentage of businesses which identified a lack of skilled workers as a constraint has increased to 35%, the equal highest quarterly level ever. The IBR data finds that 36% of businesses expect to hire more staff over the next 12 months – another record figure - but compared to 2016, fears that a skilled worker shortage will hamper growth have increased by 5% in the EU, 2% in Asia Pacific and 2% in North America so far in 2017.
Despite this, and even with increased profitability expectations at record highs, only one in five businesses globally plan to increase wages above inflation over the next year – down 1% on Q1 2017.
Michael Crowe, a Director of Grant Thornton in the Isle of Man, said: ‘While there remains a degree of uncertainty across the global economy, due to factors such as the Brexit negotiations and unpredictable US policy, it is reassuring to see optimism remains so high and revenue expectations are buoyant.
‘Confidence can lead to increased investment and trade, which generates business worldwide, driving prosperity and further optimism. The benefits of this will be felt by any economy in a position to take advantage of an upturn in trade, and as an agile and adaptable jurisdiction this could be good news for the Isle of Man.
‘However, it is clear that concerns about securing the right workforce could jeopardise growth ambitions and that hoped-for increase in investment and trade. The IBR reveals growing fears around the world that a lack of skilled workers could constrain growth ambitions, a phenomenon the Isle of Man economy is also aware of and one which could be improved upon by making inward migration of skilled workers easier.
‘The report makes it clear that the skills shortage must be addressed by investment in staff and technology, to ensure there are no barriers to expansion and the optimism can be realised.’
The IBR says the message to businesses from the findings is to plan and prepare for spending more to ensure the skills needed to drive future growth. Increasing wages is a short-term measure but, longer-term, businesses will need to look at training programmes to boost skills among existing workers, and even working more closely with education institutions to ensure the right skills are being taught at an early age.
There is also evidence that businesses are conscious of the role of robots and automation in filling skills gaps. Grant Thornton’s research shows that investment in machinery and R&D has increased in recent quarters demonstrating that many firms are taking steps to address the situation, although these are long-term solutions which will take time to deliver.
Visit www.grantthornton.global/en/insights/international-business-report/ to find out more about the findings of the latest Grant Thornton IBR.
Photo - Michael Crowe.