TORONTO--(BUSINESS WIRE)--New research from Grant Thornton’s International Business Report (IBR) reveals that businesses in developed markets look set to drive global business growth prospects in 2014, while peers in the BRIC economies face a more challenging period. Business optimism and growth indicators have increased substantially in the G7 over the past 12 months, with numbers in many emerging markets falling away, suggesting a rebalancing in the global economy.
This time last year, business optimism in the G7 economies stood at net -16% compared to 39% in the BRIC economies. However the picture heading into 2014 is markedly different with optimism in the G7 rising to 28%, driven by improvements in Japan, the UK and US, an increase of 44 percentage points. Optimism in the BRICs has fallen by 17 percentage points to 22% with Brazil hitting an all-time low (10%) and Russia its lowest level since 2009 (1%).
Stephen Binder, National Leader of Privately Held Business at Grant Thornton LLP in Canada, said: “Results from this latest IBR report show a significant shift in the global business dynamic as we enter 2014. It seems that the G7 economies are finally making a comeback, and Canadian optimism is again rising. The contrast from 12 months ago is stark – as business leaders plan for 2014, growth prospects in the G7 look more robust, even as we are seeing growing uncertainty in BRIC economies and across Latin America. Canadian business leaders must be ready to capitalize on this shifting balance."
This change in levels of business confidence feeds directly into business growth prospects. Revenue prospects across the G7 have risen by 18 percentage points over the past 12 months to 49%. In the BRICs though, expectations for revenue growth have fallen by 27 percentage points to 54% over the same period. Similarly, expectations for raising profits across the G7 were up 16 percentage points to 36% in Q4-2013 compared with 12 months previously while BRIC peers' expectations dropped 28 percentage points to 47% over the same period.
Expectations for employment, investment and salaries have also risen in the G7 since this time last year while those of BRIC peers have declined. Moreover, 12 months ago, 39% of business leaders in both the G7 and BRIC economies cited a lack of demand as a constraint on growth. This fell to 29% in Q4-2013 in the G7 but rose slightly to 40% in the BRICs.
Binder added: “At this time last year, growth prospects in the G7 economies looked markedly different. As always, Canada’s stable economy stood out, but we have seen some challenges while Europe suffered through recession and other economic troubles and the US, Canada’s largest trading partner, was on the edge of the fiscal cliff. With a return to growth, falling unemployment and rising consumer spending, G7 businesses are seeing renewed demand for their goods and services, and hopefully a more balanced global economy with less volatility.”
CANADIAN DATA HIGHLIGHTS
Optimism amongst Canadian executives surveyed rose six points to 49, significantly higher than the US (down 16 to 36%) and global (27%) numbers. Revenue expectations for the next 12 months reflect this optimism, with 42% saying they expect revenues to rise, though this is lower than the global average of 52%. Selling price expectations are up ten points to 36%.
Profitability expectations are up ten points to 40%, putting Canada on par with the global average, while employment expectations are up seven points to 27%. However, investment in plant and machinery dropped from 41% to 36%, while investment in R&D dropped from 15% to 10%—far below the global average (21%).
Several constraints to growth have dropped off in Canada this quarter. “Shortage of finance” has dropped from 16% to 12%, while “regulations and red tape” have dropped from 30% to 20%. However, the top-ranking constraint to growth remains a lack of skilled workers, up slightly from 29% to 32%. The US, by comparison, sits at 20%.
Companies expecting to offer employees a raise in the next 12 months fell slightly, though still robust at 82%. However, those expecting to offer a raise above inflation fell from 20% to just 11% in Canada this quarter.
When asked about strategic priorities for the next 12 months – a new question on this quarter’s survey – Canadian executives said increasing productivity was a top priority at 76%, with cutting costs (71%) and increasing market share (60%) rounding out the top three responses.
To view this quarter’s results, please visit www.internationalbusinessreport.com.
About Grant Thornton LLP in Canada
Grant Thornton LLP is a leading Canadian accounting and advisory firm providing audit, tax and advisory services to private and public organizations. We help dynamic organizations unlock their potential for growth by providing meaningful, actionable advice through a broad range of services. Together with the Quebec firm Raymond Chabot Grant Thornton LLP, Grant Thornton in Canada has approximately 4,000 people in offices across Canada. Grant Thornton LLP is a Canadian member of Grant Thornton International Ltd, whose member firms operate in close to 100 countries worldwide.
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Notes to editors
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of more than 12,500 businesses per year across 44 economies. This unique survey draws upon 21 years of trend data for most European participants and 10 years for many non-European economies. For more information, please visit: www.internationalbusinessreport.com.
Data collection is managed by Grant Thornton's core research partner, Experian. Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis. The research is carried out primarily by telephone.
IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 3,500 chief executive officers, managing directors, chairmen or other senior executives from all industry sectors conducted between November and December 2013.
“Grant Thornton” refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton International Ltd (GTIL) and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions.