Business leaders bracing for a global economic downturn, according to EY.
In an EY survey of 1,200 CEOs worldwide on their prospects, challenges and opportunities, 98% are bracing for a global economic downturn characterised by geopolitical tensions, supply chain disruption and ongoing COVID-19-related uncertainty, but appear split on its length, depth and severity.
Survey highlights
- 48% foresee a moderate global economic downturn, while more than half (55%) of those preparing for a persistent downturn fear a recession worse than the global financial crisis of 2007-08 in terms of its length and severity.
- For the first time since EY’s survey in 2020, restrictive regulatory, trade and investment policies (28%) have superseded COVID-19-related issues (19%) as the key reason for CEO respondents altering investment plans.
- As a result of these exacerbated geopolitical challenges, 97% of respondents are reviewing their plans with 44% delaying a planned investment and almost a third (32%) stopping planned investments altogether.
- 32% of respondents consider uncertainty around the direction of monetary policy and an increase in the cost of capital to be the greatest risks to future growth for their business.
- While concerns over COVID-19-related uncertainty have receded, almost a third of CEOs (32%) still cite this as a key risk to their business (down from 43% in October 2022).
Whether CEOs anticipate a moderate or severe economic downturn, they know that this recession will be different, said Andrea Guerzoni, EY Global Vice Chair – Strategy and Transactions.
“A combination of new factors, ranging from a re-alignment of geopolitics to a re-assessment of global supply chains, are supplementing pre-existing issues and threatening investment plans, she noted. “Fiscal and regulatory policy will be front of mind, as CEOs consider what levers to pull to survive this slowdown.”
Business leaders look for opportunities to up their edge
Despite the negative outlook, CEOs are on the lookout for opportunities to gain competitive advantage, EY pointed out.
Dealmaking of one kind or another remains a priority for respondents (89%) over the next 12 months with nearly half (46%) planning to move ahead with M&A, 58% with joint venture or strategic alliances and 34% with divestments, survey results indicated.
To further shift the dial and emerge stronger and more competitive from the downturn, 39% of respondents are planning to increase investment in sustainability as a core aspect of their strategy and offering, including net-zero and other environmental and societal priorities.
In addition, more than a third (36%) plan to increase their investment in talent, including workforce wellbeing and skills development.
The majority of CEO respondents (70%) agree that flexible working will be critical to reducing employee churn and attracting new talent.
