Cost, Cash, Growth and People Top Issues for UK CEOs
With the persisting uncertainty of the global economy and the heightened anxieties around the Eurozone, the KPMG Business Leaders Agenda Survey 2012 portrays the very real issues CEOs are facing.
The results revealed a continuing focus on cost efficiencies and cash management for 77 percent of UK CEOs.
The lack of vigorous growth is compelling many to grow the bottom line through transactions (whether to acquire market share or divest of underperforming divisions) with one in three CEOs prioritising transactions and the overall deal strategy.
Although results confirm that continued economic turbulence keeps cost management and working capital at the top of the agenda, retaining talent has been highlighted as key to keeping businesses moving forward.
Malcolm Edge, Head of UK National Markets said: “For UK businesses, by far and away the biggest theme is how to change business operations to realise cost efficiencies. Almost half (44 percent) of respondents listed this as a major area for them, slightly down on the 51 percent in last year’s survey, but still a significant number.
“Despite many businesses feeling that they managed down their cost base as far and as fast as they could during the recession, slow growth in the UK economy looks set to be on the horizon for at least the next 12 months, and businesses are now having to look seriously at long term sustainable ways to reduce costs.
“In a recessionary environment, a quick way to reduce costs would have been achieved through redundancy programmes, but UK companies with growth on their mind are acknowledging the importance of retaining talent within their organisations. A third of our respondents cited this as a key theme, as they look to the future and move their businesses forward.
The Confederation of British Industry (CBI) believes that growth will restart in 2012, but high levels of uncertainty around the economic outlook, mainly driven by the situation in the euro area, mean growth will remain subdued, particularly in the first half of this year.
John Cridland, CBI Director-General said: “Economic conditions will continue to be tough, especially in the first half of the year, and the UK recovery will depend on the successful resolution of the Eurozone crisis.
“But some activity has picked-up since before Christmas and the mood among many businesses has improved, with exception of companies serving the UK consumer where business remains flat.
“Although risks remain we expect growth this year, improving modestly in 2013, primarily driven by positive net trade and business investment.”
The Business Leaders survey provides a valuable insight into the boardroom issues concerning CEOs today; the uncertainty of the economic climate requires an agile response; by focusing on the aspects within the business’ immediate control such as costs and cash, it allows CEOs to quickly respond to the evolving external environment as required.
Uncertainty around the Eurozone is demonstrated by the 51 percent of respondents that believe we are entering a second Great Depression and 79 percent believing we will see at least one country defaulting on sovereign debt. The inability to predict the outcomes accurately over the next 12 months means companies are more likely to remain reactive to events rather than proactively establish contingency plans.
A quarter of CEOs are looking at major business model changes and this is in line with the activities we have seen around business operations, removal of duplication within the back office, creating leaner supply chains and efficient locations.
An interesting result is the issue of “people”, which received a higher priority listing than risk or innovation. This focus on talent highlights the importance of a strong motivated workforce to maintaining the business when growth is limited. 43 percent of those citing people as a major issue indicated that motivating key people is the highest priority.