www.consultant-news.com  29.01.2009

Nevertheless, business leaders see a flicker of light at the end of the tunnel, with more optimism about recovery and growth over the next three years.

Growth expectations have been severely impacted by the unprecedented economic and financial turmoil. As the economic downturn deepens, the mindset of the UK CEO has had to change, rebalancing short term survival with long term ambitions. Many are now opting for lower risk strategies for growth: financing expansion from internally generated cash flow, retrenching into existing markets rather than seeking mergers and acquisitions (M&A) to grow market share and reducing spend on new product development. Despite this, UK CEOs still recognise that they must not lose sight of important drivers for long term success, such as retention of talent and planning for global issues such as climate change.

Ian Powell, UK chairman and senior partner, PricewaterhouseCoopers LLP, said: “Nobody could have prepared for the events we have witnessed over the last few months. Many UK CEOs had no choice but to make tough decisions and redefine what success looks like for their businesses. The coming year will test the CEO’s belief that the ability to adapt to change is one of the most important sources of competitive advantage in sustaining long term growth.”

Business confidence battered by global financial crisis

Worldwide, just 21% of CEOs said they were very confident of revenue growth in the next 12 months, down from 50% in last year’s survey.

CEOs in developing countries (particularly in BRIC countries) are far more optimistic about the future than those in developed economies. Only 15% of CEOs in North America and 15% in Western Europe expressed confidence about growth in the year ahead, compared with 31% in Asia Pacific and 21% in the emerging economies of Central and Eastern Europe.

Longer term, one third of CEOs globally (34%) said they were very confident of growth over the next three years, down from 42% previously.

Growth through collaboration

There has been more M&A activity in the UK than globally, with 29% (compared to 20% globally) having completed a cross border M&A in the last year. Planned M&A activity in the UK is down from last year (32% from 42% in 2008) as more businesses plan to penetrate existing markets to grow. Cultural issues and conflicts, realising the expected value of the transaction and unexpected costs are cited as the greatest concerns when considering M&As.

Worldwide, CEOs are looking towards more collaborative methods to grow their businesses in the next three years, with more focus on joint ventures and strategic alliances (44%) over M&A (25%); perhaps reflecting the lower cost and risk levels associated with joint ventures.

Managing talent through the downturn

Availability of key talent remains a significant threat for many business leaders. Some 40% of UK CEOs are concerned or extremely concerned about the availability of key skills. Significantly more UK CEOs (78%) believe that there is a limited supply of candidates with the right skills compared to their global counterparts (69%). The ability to provide attractive career paths (65%) and competitors recruiting the best people (65%) were also cited as major challenges.

Redeploying key staff within the organisation (87%) and creating a flexible working environment (81%) were identified as significant challenges for attracting and retaining talent.

Fuelling long term success

While the attention of UK CEOs is turned towards survival in the short term, access to and retention of key talent (69%) is considered critical in achieving competitive advantage and sustainable operations. The ability to adapt to change (68%), high quality customer services (68%) and a strong brand and reputation (62%) are regarded as key characteristics of success by UK CEOs.

UK CEOs overwhelmingly recognise the need for information to fuel long term success. Information about risk (74%), financial forecasts and projections (71%) and customer and client preferences (71%) are the most critical sources of information to fuel long term success. Despite this, of the CEOs that rated each types of information as critical or important, only 31% of UK CEOs said they had comprehensive information about the risks they are currently exposed to, only 52% said they had comprehensive information about financial forecasts and projections and only 22% said information was comprehensive with regards to customer needs.

Climate change and energy efficiency

Three quarters of UK CEOs have or are planning to (in the next 12 months) make changes to their day-to-day operations to help tackle climate change, and 67% have or are planning to make changes to the products and services they offer. A large number of UK CEOs said that they are already making a return on their investment in several areas of their businesses.

However, further investment and progress to tackle climate change is hindered by inadequate or ambiguous government policy relating to climate change. Forty six percent of UK CEOs see a clear and consistent policy framework from government as critical in helping them adapt to climate change.

Worldwide, 82% of CEOs are taking steps to reduce energy costs by findings efficiencies in their operations and more than half said they are seeking alternative energy sources. UK companies are also investing in technology to reduce energy dependence and trying to secure future energy supplies.

A delicate balance for government stewardship

Now more than ever, UK CEOs are looking to government for greater public sector support and clearer and more consistent policy frameworks. Many UK CEOs do not believe government is doing enough to reduce the regulatory burden for corporates (82%), help create a skilled workforce (56%), support companies in securing natural resources (64%) and improve the UK’s infrastructure (69%).

More can be done by government to collaborate with the private sector in the design of policies and regulations, according to half of UK CEOs. However, this relationship could be hindered by the fact that less than half (47%) of CEOs in the UK collaborate or are planning to collaborate with government as a key stakeholder to their businesses.

UK CEOs want governments to strike the right balance in dealing with global solutions. On the one hand, they want more government leadership and action on global issues such as climate change, yet on the other hand many (36%) do not agree that the government should drive convergence of global tax and regulatory frameworks. As evidence of this, half (50%) of UK CEOs are concerned or extremely concerned about over regulation as an obstacle for growth.