The latest statistics from a global business outlook survey reveals that the UK is second to only Greece in its lack of economic optimism for the coming year.
The study shows that concern is growing in UK businesses over the lack of clarity on the Brexit strategy, and the levels of confidence that UK finance directors feel going into 2017 stands at 49.9 on a scale of 100, compared to nearly 62.3 at the same time last year. In December 2015 firm optimism was 68.3 and is now 58. Conversely, these numbers have risen in continental Europe.
The Optimism Index is calculated using scores out of 100 on two key questions: optimism about the country’s economy, optimism about their own company.
As a consequence of this gloominess about the future, the United Kingdom is one of the few economies in Europe where investment forecasts are down. UK investments are predicted to fall by 6.3 per cent,whereas in France for example, there is an expected rise of 4.9 per cent.
The consequences of Brexit are likely to be long-term, but the first signs point to caution regarding the future economic growth of the country.
In contrast, American CFOs are much more optimistic about the US economy following the election of Donald Trump, particularly in terms of regulations and tax reform. But many companies are still waiting to see the details before taking specific actions.
For the last five quarters, the US Optimism Index has hovered around the long-term average of 60 on a 100-point scale. This quarter, post-election, the index jumped to 66, the highest level in nearly a decade. The proportion of CFO’s becoming more optimistic outweighs those becoming more pessimistic by four to one. Historically, a jump in the optimism index has predicted strong employment growth and rising GDP over the next year.
The Global Business Outlook is carried out yearly by Grenoble Ecole de Management, the Fuqua School of Business at Duke University, CFO Magazine and Tilburg University. It has been conducted for 83 consecutive quarters and spans the globe.
