Globally, business optimism is at its highest level on record according to new research by Grant Thornton.
The International Business Report, a quarterly survey of 2,400 businesses in 36 countries, saw record-breaking optimism levels – at 49% - in the first quarter of 2017. It also recorded confidence is especially strong in the US, which may be impacting on attitudes globally.
The IBR findings suggest that the new pro-business US administration is acting as a catalyst, releasing pent-up confidence after a long period of supportive monetary policy and cheap oil. Although the dollar has come off its recent high, it remains strong at a time of relatively low-cost financing and healthier global growth.
Countries across the European Union have seen a collective increase in optimism from 34% to 39% in the last quarter, despite the decision of the UK to leave the EU.
However, the Grant Thornton research reveals US optimism is not impacting on other areas of business, with revenue and profitability levels in some countries down in Q1.
Michael Crowe, a director at Grant Thornton in the Isle of Man, said: ‘After a year with so much uncertainty, due to the Brexit referendum and US election, it looks as though confidence is returning in 2017.
‘Led by improving confidence among business in the US, often seen as the engine room of the global economy, we are seeing optimism for the year ahead rising in key markets. This will be very positive news for Isle of Man firms doing business in the UK, EU and further afield as it indicates the potential for more trade.
‘However, the IBR survey for Q1 does also show that while globally businesses are feeling more optimistic, for many economies that is yet to translate into rising revenue and profitability. It will take time for the positivity to result in improved turnovers, but this research suggests now, while there is a wave of optimism, is a good time for Manx businesses to be exploring opportunities internationally.’
Globally, export expectations are up from 16% to 18% over the past three months, with prospects improving particularly across the developed Asia-Pacific (+4% to 12%), the G7 (+3% to 17%) and the EU (+2% to 24%). Nigeria (+26% to 40%), Germany (+13% to 35%), the Netherlands (+12% to 30%) and Ireland (+10% to 28%) have seen the most improvement. The data also reveals global rises in expectations of investment in plant and machinery to 34% (+1%) and new buildings to 22% (+3%).
Francesca Lagerberg, Global leader at Grant Thornton, said: ‘Growth in US investment expectations are clearly opening up opportunities for trade. In light of this, businesses should assess their export strategies over the coming years and consider how to take advantage of where investments are likely to strengthen.’
The latest IBR also reflect worries about recruiting and retaining skilled staff, which are mirrored in the Isle of Man. International concern over a lack of skilled staff is at a two and a half year high of 33%, while global hiring expectations have also risen from 29% to 32%. This is a particular problem in tight labour markets, where businesses that don’t provide above inflation wage growth may soon find workers looking elsewhere.
Mr Crowe added: ‘Some sectors in the Isle of Man are acutely aware of how tough it can be to find staff with the right skills. Grant Thornton’s research suggests that increasing issues in the employment markets of other countries, notably the UK, might actually be beneficial for the Isle of Man if we can react.
‘It is reported that fewer business in the UK are expecting to offer above inflation pay rises this year, so Island employers that can provide competitive salaries could prove attractive to skilled workers in the UK.’
Photo - Michael Crowe.
