Irish CEOs are significantly more confident in the economy and in their own businesses compared to last year.
A large majority of Irish CEOs view the increasing tax burden, rising labour costs and the availability of key skills as key threats to this growth.
These are some of the key findings from PwC’s 2014 CEO Pulse Survey, carrying the views of over 250 Irish CEOs, launched today.
Key findings in the survey include:
- Confidence in Ireland’s economy has almost trebled since last year. An overwhelming majority (86%) of Irish CEOs are positive about the outlook for Ireland’s economy, up from 31% last year. More CEOs are now confident in our economy compared to 2007 and pre-recession times;
- Over three-quarters (77%) are favourable about the future prospects for their own businesses, up from 44% last year;
- This positivity is echoed in the anticipated performance of aspects of Irish operations: 77% expect revenue growth and 69% expect profit growth, up from 56% and 53% respectively on last year.
- Almost 9 out of 10 MNC CEOs plan to increase or maintain their investment in Ireland with access to highly skilled people being the most critical factor;
- Over half (58%) plan to increase the workforce, up from 34% last year and 36% in 2008. However, over one in ten (13%) are still looking at headcount reductions;
- According to the survey, much of this growth is fuelled by opportunities in ‘existing’ markets with nearly two-thirds (60%) planning expansion in existing domestic or foreign markets. One in ten (10%) plan to target new geographic markets. Nearly one in five (19%) are looking to new product or service innovations and 10% see opportunities through M&As/joint ventures.
- Half (49%) have capital investment plans, up from 43% last year;
- Overall, 58% of respondents report their businesses to be in better financial health now compared to the period prior to the financial crisis some five years ago. However, nearly a quarter 23% feel they are in a worse position;
- The increasing tax burden is a key challenge for 86% of CEOs. Other key challenges include rising labour costs (81%) and the availability of key skills (69%), and
- Nearly a third (30%) say finance is more readily available now compared to a year ago, up from 16% last year. One in ten reported plans to restructure existing borrowings in the year ahead; a similar proportion (11%) plan new borrowings while 62% do not envisage any change to their capital structure.
Welcoming the survey, the Minister for Jobs, Enterprise and Innovation, Richard Bruton TD, said: “At the centre of the Government’s Action Plan for Jobs is supporting the transition from the old unsustainable economy to a new growing economy based on enterprise and innovation. This transition, which has been underway for over 3 years now, has been painful for many workers and businesses, but it is becoming increasingly clear that it is starting to deliver concrete results across the economy. The CEO Pulse Survey published by PwC today is a very welcome addition to our understanding of what is happening in the economy, and is the latest in a growing number of signs that the jobs recovery which has started over the last two years is set to broaden and deepen. We in Government will continue to make the changes necessary to make Ireland the best country in the world for enterprise, and support
businesses to create the jobs we need”.
Overwhelming confidence in FDI
An overwhelming majority (92%) of responding MNC CEOs confirmed that their company’s investment in Ireland is considered to be a success. Almost 9 out of 10 currently plan to increase or maintain their investment in Ireland. The ability to access highly skilled people is the most critical factor (78%) for increasing and/or maintaining this investment, according to the survey, up from 31% last year. Competitive wage rates (76%) and improved cost competitiveness (56%) are also very high on the agenda. The retention of the 12.5% corporate tax rate is important for over two-thirds (69%). Having a competitive personal tax regime for foreign employees working in Ireland is twice as important compared to last year.
A third expect exports to increase more than 10% in the next 3 – 5 years
Two-thirds (66%) of Ireland’s business leaders expect their export volumes to grow in the next 3 – 5 years. However, this represents a drop from 73% last year. A third (32%) expect export volumes to grow by more than 10%. The survey reveals heightened interest in the UK and Western Europe with a third more CEOs targeting these markets compared to last year. There is also greater interest in some emerging markets such as China, Brazil, Japan and Africa.
Speaking at the survey launch, Ronan Murphy, PwC Senior Partner, said: “The survey shows that the pendulum has swung with levels of confidence across many areas of business now higher than 2007 and pre-recessionary times. Substantially more CEOs expect revenue and profit growth and confidence amongst MNC CEOs has also improved. The survey also highlights that the skills challenge persists and competitive wage rates is a key concern for both indigenous and multinational CEOs.”
Increasing tax burden and rising labour costs are key challenges
The increasing tax burden is the greatest economic and policy threat for business growth and is likely to reflect Ireland’s high levels of personal taxes and the heightened global corporate tax debate. Rising labour costs is the top business threat and reflects CEOs concerns around wage inflation as they strive to attract and retain key talent. Irish CEOs are more concerned than their global counterparts in both of these areas. Other top challenges include over-regulation (83%), availability of key skills (69%), cyber threats (69%) and the speed of technological change (62%).
International tax system is in need of reform
The survey reveals that nearly two-thirds (64%) of Irish CEOs are of the view that the international tax system is in need of reform. A similar proportion report that the current international tax system does not meet the needs of multinationals. However, less than 2 out of 5 feel that a consensus on tax reform can be achieved among the G20 countries in the near future. Nearly half (47%) feel that multinationals should be required to publish the revenues, profits and taxes paid for each territory where they operate. Half (50%) say that it is appropriate for tax authorities around the world to share freely information they have on companies amongst themselves.
Talent constraints continue
The survey reveals that the availability of key skills has increased as a key threat to business growth over the last four years and Irish CEOs are more concerned than their global counterparts. In fact, over a quarter (28%) say such talent constraints have significantly impacted their company’s performance. Not being able to pursue a new market opportunity (44%), cancelling a strategic initiative (33%) and reducing innovation (29%) were the top areas impacted by such talent constraints.
Data analytics is becoming more important for enabling evidence-based decision making on people matters. However, the survey reveals room for improvement with regard to critical talent related information. For example, only around a quarter receive comprehensive information on the costs of employee turnover (26%) and staff productivity (24%). Only one in six (16%) receive sufficient information on return on investment in human capital. Only half (51%) receive comprehensive information on labour costs.
Ann O’Connell, Partner, PwC, added: “Despite rising business confidence equating to more jobs, organisations in certain sectors are struggling to find the right people to fill these jobs. CEOs realise that they need the right talent to fuel their growth plans and the skills of today are not necessarily the skills for the new digital world. The most successful organisations will combine recruitment with developing their own people to be more adaptable to its changing plans.”
Reducing personal tax is the top priority for Government
Over half (51%) of Irish business leaders are calling for Government to prioritise reducing personal tax and/or widening the tax bands, up from 29% last year. Other key areas include continuing the focus on job creation (50%) and reducing public sector costs (46%). Perhaps a sign of the progress being made is that ensuring available finance and reducing the national debt have fallen significantly compared to last year.
Managing global change – Irish CEOs lag their global counterparts
Irish CEOs lag their global counterparts in terms of capitalising on the opportunities of global change. Nearly two-thirds (60%) of Irish CEOs reported that technological advances is the top global trend that will impact their businesses (Global: 81%). In terms of capitalising on these changes, only 16% of Irish CEOs have already initiated or completed change programmes to become more innovative (Global: 27%). Just over one in five (22%) have made any headway in getting to grips with big data (global:28%) and only a quarter have altered their technology and digital investments (Global: 35%).
Paul Tuite, Head of Advisory, PwC, concluded: “The survey shows that the search for growth is on the increase as the economy gradually rebalances itself. How we capitalise on changing global trends and the opportunities brought about by digital technologies will be critical for our long term success. This includes being exceptionally competitive, using innovation and minding our key talent as we grow markets and customers.”