An accountancy firm says bosses are gloomy about global economy and one of its bosses here believes the Isle of Man will feel pressure as a result.

PwC’s 23rd survey of almost 1,600 business chief executives from 83 countries across the world, shows record levels of pessimism in the global economy, with 53% predicting a decline in the rate of economic growth in 2020. This is up from 29% in 2019 and just 5% in 2018 - the highest level of pessimism since we started asking this question in 2012.

By contrast, the number of chief executives projecting a rise in the rate of economic growth dropped from 42% in 2019 to only 22% in 2020.

The survey published at the World Economic Forum in Davos, Switzerland, explored the sources of uncertainty and how chief executives globally were taking action to address it.

In 2019 when asked about the top threats to their organisation’s growth prospects, uncertain economic growth ranked outside the top 10 concerns for chief executives at number 12.

This year it has leapt to third place, just behind trade conflicts - another risk that has risen up the chief executives’ agenda - and the perennial over-regulation, which has again topped the table as the number one threat for bosses.

Business leaders are also increasingly concerned about cyber threats and climate change and environmental damage, however despite the increasing number of extreme weather events and the intensity of debate on the issue, the magnitude of other threats continues to overshadow climate change which still does not make it into the chief executives’ top 10 threats to growth.

’Given the lingering uncertainty over trade tensions, geopolitical issues and the lack of agreement on how to deal with climate change, the drop in confidence in economic growth is not surprising - even if the scale of the change in mood is,’ said Bob Moritz, chairman of the PwC Network.

’These challenges facing the global economy are not new - however the scale of them and the speed at which some of them are escalating is new, the key issue for leaders gathering in Davos is: how are we going to come together to tackle them.

’On a brighter note, while there is record pessimism among business leaders, there are still real opportunities out there. With an agile strategy, a sharp focus on the changing expectations of stakeholders, and the experience many have built up over the last ten years in a challenging environment, business leaders can weather an economic downturn and continue to thrive.’

Ian Clague, senior partner at PwC Isle of Man, said: ’The chief executive officers’ views in this survey have historically had a strong correlation with actual GDP growth and so this has to be seen as a warning on future growth levels.

’The Isle of Man, whilst operating in niche markets, will inevitably feel pressure if there is less growth as it will mean countries come under fiscal pressure and fight harder for their share of the global economic cake.

’Island-based businesses are facing similar challenges to these global trends, with the availability of technological skills, cyber threats and their organisations impact on the planet all to the fore.

’It is important for businesses to invest in these areas for a digitally enabled and sustainable future to meet the changing expectations of a widening stakeholder base.’

The survey focuses on chief executives insights in these areas:

Growth

Chief executives across the world are less optimistic about their own revenue growth with only 27% of them saying they are ’very confident’ in their own organisation’s growth over the next 12 months - the lowest level we have seen since 2009 and down from 35% last year. In the UK the figures are 26% and 37% respectively.

Technology regulation

Chief executives predict significant regulatory changes in the technology sector. Globally over two-thirds of chief executives believe that governments will introduce new legislation to regulate the content on both the internet and social media and to break up dominant tech companies. A majority of chief executives (51%) also predict that governments will increasingly compel the private sector to financially compensate individuals for the personal data that they collect.

Upskilling

The shortage of key skills remains a top threat to growth for chief executives globally and whilst they agree that retraining/upskilling is the best way to close the skills gap only 18% of chief executives say they have made ’significant progress’ in establishing an upskilling programme. In the UK, 79% of chief executives say they are concerned about this making it the second top business concern, trumped marginally by cyber threats (80%).

While 66% of chief executives say their organisation is making moderate or significant progress on defining the skills needed to drive future growth, only 55% of UK chief executives are focused on upskilling their workforces.

Climate change

Although climate change does not appear in the top 10 threats to chief executives’ growth prospects, they are expressing a growing appreciation of the upside of taking action to reduce their carbon footprint.

Compared with a decade ago, when PwC last asked this question, chief executives are now twice as likely to ’strongly agree’ that investing in climate change initiatives will boost reputational advantage (30% in 2020 compared with 16% in 2010) and 25% of them today compared with 13% in 2010 see climate change initiatives leading to new product and service opportunities for their organisation.

More than half (51%) of UK chief executives recognise that finding solutions to the climate crisis presents a significant business opportunity.