International business leaders have reported a strong increase in optimism heading into 2017, according to a Grant Thornton survey of 2,600 businesses in 37 economies.
Findings from the Grant Thornton International Business Report (IBR) for the final quarter of 2016 suggest that business leaders are putting a period of uncertainty around many major issues behind them. While pockets of difficulty remain, the survey shows that businesses entered the New Year in a positive frame of mind.
Richard Ratcliffe, a director at Grant Thornton in the Isle of Man, said: ‘There was a great deal of uncertainty and low optimism in 2016, especially surrounding the Brexit referendum and the US Presidential election. Some of the uncertainty has now been removed, with outcomes known, so businesses can have a much clearer idea of how key issues, such as taxes, jobs and trade policies, may develop. Due to this, the IBR findings show optimism heading into 2017 is strong and this could have positive benefits for firms in the Isle of Man, especially those which do business internationally.
‘Greater optimism can trigger larger investment and more trade, creating increased business opportunities for the Island.’
The research reveals that, globally, business optimism at the end of Q4 2016 stood at net 38%, an increase of 5 percentage points from the previous quarter and the highest level since Q3 2015. In the US, optimism increased from 43% to 54% and the trend is repeated around the globe; the world’s two other big economic blocs, China (30% to 46%) and the EU (28% to 34%), reported similar jumps.
Richard added that there is still some uncertainty, as the policies of newly elected US President Donald Trump become clearer and the Brexit negotiations develop, but business leaders are broadly welcoming the fact there was greater clarity in the final three months of 2016 than earlier in the year. This is not only reflected in the optimism levels revealed by the IBR survey, but also in the investment and revenue expectations findings as well.
The survey found that, globally, the proportion of firms expecting revenue to increase in 2017 has gone up by 5pp to net 50%, the highest figure in nearly two years. China (+14pp) and the US (+11pp) reported strong swings in revenue expectations in Q4 and the global outlook for selling prices (+13pp) and profitability (+4pp) is equally strong. Plans to invest more in plant & machinery are also at a two-year high (33%).
However, the IBR also reveals that the picture is not entirely positive. Business optimism in Mexico has fallen to just 8% in Q4, the lowest quarterly figure it has ever recorded, and in Russia optimism has fallen 13pp to -7% (more pessimistic than optimistic). Business leaders in the developed APAC economies (down from -8% to -16%) are also markedly more pessimistic. In addition, the proportion of firms in the EU citing exchange rate fluctuations as a constraint on growth has increased by 8pp to 21%, as elections in France and Germany have the potential to cause market uncertainty.
Richard concluded: ‘There will be challenges in 2017, but that shouldn’t mean that growth plans should be abandoned. It may mean investing for greater efficiency, hiring new skilled workers or researching new markets or services, but those dynamic firms with the ability to think long-term and focus on their operations will be the big winners.
‘The IBR findings of increased global optimism should encourage Isle of Man firms to look for new business opportunities in international markets with the knowledge, based on Grant Thornton’s research, that there is an expectation of more investment and greater revenues this year.’
