Confidence in economic growth rising among UK CEOs

UK CEOs are feeling more confident about economic growth over the next 12 months, an EY survey has found. 

The latest EY CEO Pulse survey of 100 UK CEOs found that over two-thirds of CEOs (67%) felt very or somewhat optimistic about the UK’s economic outlook for the next 12 months. 

Confidence in their own companies is also high. Almost three quarters of respondents (73%) said they feel very or somewhat confident about their company’s profitability over the next year and 68% said they feel positive about investment in new areas.

“After a challenging few years, it’s encouraging to see a positive shift in sentiment among UK business leaders,” Silvia Rindone, UK&I managing partner for strategy and transactions at EY, said. 

Navigating industry disruption

Disruptive forces, including emerging technologies and geopolitical uncertainty, are shaping CEOs’ priorities.

Forty-five percent of respondents identified emerging technologies such as artificial intelligence as one of the top disruptors for their industries and markets over the next year. 

The shifting global economic environment and geopolitical instability were also identified as key disruptors by 38% of CEOs, while 36% of respondents said the rising cost of capital is also a key disruptor. 

Climate change and environmental issues were shown to be a lower priority, only 23% of UK CEOs said these were one of their top three “disruptive” policies.

When asked about how they respond to these disruptive forces, just over a third (34%) of respondents said they were highly responsive and ahead of the curve, while 64% said they are moderately responsive but need improvement in key areas.

UK CEOs feel that conventional portfolio review processes need to change when it comes to how they review their responsibilities to respond to disruptive forces.

Thirty-five percent of respondents said portfolio reviews tend to be reactive rather than proactive and 30% said they are not aggressive enough due to complacency about the future.

When asked about the frequency with which they assess their business assets against their core strategy, just over half (53%) said they do so on a quarterly basis, 18% said semi-annually and only 15% said they do so on a monthly basis. 

Rindone said: “This renewed confidence, reflected in our latest survey, will help drive UK CEOs to move from a reactive to proactive deal strategy and and capitalise on disruptive forces at play.”

She added: “It’s critical that business leaders maintain an agile and forward-thinking approach to portfolio management to adapt to this new dynamic landscape and ensure they don’t get left behind.”

Strategic transactions remain a priority 

Almost all UK CEOs surveyed (98%) said they expect to actively pursue transaction initiatives over the next year. Of these, 40% are focused on mergers and acquisitions (M&A), 49% are exploring joint ventures or strategic alliances and 31% are considering divestments, spin-offs or IPOs.

Ninety-one per cent of respondents said they had paused or cancelled a transaction in the past year, most of which (32%) said this was due to too-high financing costs.

Rindone said: “The CEO survey results highlight a significant appetite for transactions among UK CEOs, however, while many are eager to engage in deals, the fact that 91% had to pause or cancel transactions due to high financing costs underscores the ongoing challenges of capital availability.

“This balancing act between opportunity and financial caution will likely shape corporate strategies in the year ahead.”