A quarterly survey of 2,500 companies across 36 economies found global business optimism fell to a three-year low in the first quarter of 2016.

Martin Kneale, a Director at Grant Thornton Isle of Man, said the report identified a combination of fragile financial markets, volatility in oil prices, concerns over terrorist attacks and regional issues - including the prospect of a Brexit and the US Presidential race – among the reason for the majority of regions claiming uncertainty in their economic outlook. The report also showed expectations for revenue, exports and research and development (R&D) investment had also fallen.

Despite the findings, Grant Thornton is urging businesses to look beyond the current uncertainty in order to invest for future growth. Mr Kneale added the report should be studied by companies in the Isle of Man which do business in the UK, Europe and beyond.

He said: ‘A fall in confidence and ongoing economic uncertainty will lead to a reduction in investment and spending, which could impact on Manx firms doing business in other countries. The findings of this report will help them understand the likely economic conditions over the coming months, until confidence begins to return, allowing them to plan for a potential downturn in trade.

‘However, while being aware of the current conditions Grant Thornton is urging businesses to look to the future, beyond this wobble in confidence, and continue to invest in growth in coming years. That message is just as relevant to Isle of Man firms doing international business as those located in other countries.’

The Grant Thornton International Business Report reveals that global business optimism fell to net 26% in Q1, the lowest quarterly figure since Q4 2012. The trend is evident across the globe, including the G7 (down 7% in Q1), EU (down 4%), North America (down 6%), Latin America (down 16%) and Asia Pacific (down 10%).

The fall in the UK (73% to 44%) is the largest of any EU member state in Grant Thornton’s research.

The findings come despite many fundamentals in the global economy remaining steady since the turn of the year. Official figures show that unemployment rates have continued to nudge down in many major economies including the US and Germany, while retail figures also remain strong across Europe and North America.

Grant Thornton Global CEO Ed Nusbaum said: ‘Businesses feel caught in a tangled web of pressures. This is as sober a measure of business sentiment we’ve seen since the global economy returned to post-crisis growth. However, we’ve not seen a major economic jolt in the first quarter which could have triggered this drop in optimism.

‘There is a risk we could talk ourselves into a downturn when, in fact, moments like this present longer-term opportunities. A common feature in the stories of the most dynamic and successful firms is that they don’t let the noise from these external factors out of their control distract them from looking at their own operations, and they continue to invest in the pursuit of growth years down the line. That may appear easier said than done at the moment, but without investment now, businesses will find themselves behind the curve when conditions overhead improve.’

The IBR reveals that 35% of businesses globally expect to increase revenue over the next 12 months – the lowest figure since Q2 2012. At the same time, just 13% of businesses expect to export more over the coming year, which is the lowest figure recorded since Grant Thornton began surveying quarterly in 2010.

However, Grant Thornton’s figures do reveal a glimmer of hope in the shape of consumer spending power. With inflation rates low, nearly one in five (19%) firms globally plan to award employees an above-inflation pay rise this year – the highest figure ever recorded.

Mr Nusbaum concluded: ‘For businesses navigating their way through choppy waters, the priority should be sticking to their intended course. Focusing on R&D may seem less attractive when revenue and export targets look less achievable, but in fact this is exactly the time when trusting your instinct and making those investments can ultimately reap the biggest rewards.’

Photo - Martin Kneale, Director at Grant Thornton in the Isle of Man.