Business optimism among mid-market organisations globally has slumped six percentage points from 70% to 64%, said Grant Thornton recently when releasing its latest International Business Report.
While business optimism remains high against historic levels, mid-market organisations are conscious of the challenges they face with 63% citing economic uncertainty as the major constraint facing them, Grant Thornton pointed out.
This is closely followed by energy costs (62%) and labour costs (57%), the firm added.
- Export expectations remain near record highs, with 44% of mid-market respondents anticipating increases in the next 12 months.
- Likewise, 42% expect to increase both their international revenue and the number of countries sold to, with 58% of respondents expecting total revenue to increase in the next 12 months.
- While some governments announce support programmes to tackle rising energy costs and, by default, economic uncertainty, it is easy to see why labour costs are seen as a constraint for businesses with 83% expecting to increase salaries in the next 12 months.
- There is, however, a limit to what businesses can afford with only 22% of businesses indicating they intend to offer above inflation salary increases.
- Despite these constraints, mid-market businesses are still investing with technology once again topping the list with 60% expecting to increase investment in this area over the next 12 months – equalling the record set last year. This is followed by investment in research and development (55%) and staff skills (55%).
- While investment in new buildings remains bottom of the list with 40% expecting to increase investment over the next 12 months, this is a still a record high since we first started collecting mid-market data in 2011.
- But this 40% figure well above the long run average of 26% — possibly explained by businesses having to invest in new hybrid working models.
- To give business optimism a boost, Dave Munton, global head, international business support for Grant Thornton International Ltd suggested that companies need to rebuild resilience.
“In building resilience, there are lessons that can be drawn from how businesses responded to Covid-19,” said Dave Munton, global head, international business support for Grant Thornton International Ltd. “It’s about scenario planning, doing the basics well, building resilience and not taking too many risks. Businesses need to do less, better.”
Global expansion trends
In light of mid-market’s desire to expand internationally, Grant Thornton has identified the following four key trends.
1. Appetite for international expansion remains strong within the mid-market
2. Global trade routes and supply chains are reshaping along geographic and political lines
3. International plans and pressures differ markedly across regions
4. Inflation is still rising. Mitigating its impact is central to international success