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The latest Global Economic Conditions Survey from ACCA and IMA (Institute of Management Accountants), offers an early indication of how uncertainty will effect OECD economies, with business confidence subdued despite an improving global outlook. Responding to the findings, Faye Chua, ACCA head of business insights said,
‘Fears of global recession seem to have eased over the past quarter as China’s currency stabilises, the US enjoys a consumer-led recovery and commodity prices have started to rise. Yet low levels of confidence across Europe in the run-up to the UK referendum has offset some of those fragile gains as jittery markets from the US, UK and across the emerging world suffer declines.’
Faye Chua adds that outside of Europe, there had been cautious grounds for optimism in business confidence:
'GECS showed that business confidence picked up a little, having hit a four-year low in the first quarter. The number of firms that said their prospects have deteriorated over the past three months fell to 43%, in Q2, from 48% in Q1.'
Raef Lawson, vice president of research and policy at IMA, also noted:
'The improvement was driven by non-OECD economies. Commodity-producing economies in particular have benefited from recent price rises with optimistic expectations of government spending in Africa and the Middle East, where governments are reliant on commodity revenues.
'Although there has been a slight rise in confidence it is yet to translate into meaningful increases in capital expenditure and employment indices. Half of firms are still either cutting or freezing employment, while only 13% are increasing investment in staff. Only 16% of businesses reported they are increasing investment in capital projects, compared with 41% that said they are reducing it.'
Faye Chua anticipates the potential impact of Brexit will be felt globally for the foreseeable future:
'It would not be a surprise if business sentiment fell again in Q3. And the potential for long-term uncertainty as the UK negotiates its complex departure from the EU could weigh down on global confidence for some time to come.'
Fieldwork for the Q2 2016 GECS took place between 3 and 20 June, and attracted more than 1,200 responses from ACCA and IMA members around the world, including more than 130 CFOs. Nearly half the respondents were from small and medium enterprises, with the rest working for large firms of more than 250 employees.