Despite credit crunch panic, global business optimism drops only slightly

According to Grant Thornton International Business Report, global confidence remains unexpectedly robust.

Businesses are resilient in the face of global financial turmoil according to the Grant Thornton International Business Report (IBR). The annual survey of privately held businesses shows that despite intense media coverage of the global financial crisis, 42 per cent of businesses report feeling optimistic about the economic outlook for the next 12 months. This is only three percentage points lower than that reported in January 2007. Optimism in the United States has even gone up this year to 22 per cent from 14 per cent, despite the sub-prime mortgage crisis and resulting credit crunch.


When asked about specific business practices, survey respondents are positive about the future. For example, a balance of 64 per cent of businesses globally expect turnover to increase over the next 12 months. A balance of 34 per cent of businesses globally are expecting to raise their selling prices over the next year. Also, 22 per cent of businesses are expecting to increase exports, a two per cent increase on 2007.

However, is the optimism of the surveyed global business leaders misplaced? Alex MacBeath, Global Leader of privately held business services says: The positive survey result is very encouraging after a summer of financial turmoil. It reflects confidence that the global economy will remain buoyant, though the robust pace of the past five years has ended and we have entered a period of greater uncertainty.

There are, however, key threats facing businesses and the global economy over the coming 12 months. These include the end of fixed rate mortgage deals for millions of homeowners. The financial implications are not only a marked slowdown in the global housing market, but also a reduction in consumer spending. There is also a fear that the seizure in credit may filter down to consumer credit and mortgage repayments causing significant increases in loan defaulting and home repossessions.

Most optimistic
Indian and Philippine businesses are the most positive with 95 per cent of businesses optimistic about the year ahead. Their optimism can be attributed to the robust economic growth of recent years and widespread expectations that the momentum will be sustained during 2008.

Most pessimistic
Japanese businesses are the least optimistic. In a reversal of the trend seen since 2003, pessimism levels in this year’s survey slumped from a balance of -5 per cent to -44 per cent.

Mr. Chikahiko Honda, managing partner of Grant Thornton Japan says: "The strength of the Yen is hurting exports. Low levels of Japanese consumer demand and the slowing US economy are strongly affecting sentiment. Furthermore, housing construction has drastically decreased due to tougher government regulations for housing inspection. These factors contributed to the economy shrinking in Q2 of 2007."

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Notes to editors
Grant Thornton International started a major annual survey of the attitudes and expectations of small and medium-sized businesses in 1992 called the European Business Survey (EBS). In 2003 the research project was widened to an international perspective covering medium-sized businesses and renamed the International Business Owners Survey (IBOS).

In 2007, the survey’s name was changed from IBOS to the International Business Report (IBR). The IBR survey draws upon 16 years of trend data for original EBS participants and 6 years for original IBOS countries. The 16 year trend data is available for: France, Germany, Greece, Ireland, Italy, Netherlands, Spain, Sweden and the United Kingdom, while the 6 year trend data is available for Australia, Canada, Hong Kong, India, Japan, Mexico, Russia, Singapore, South Africa and the United States.

Grant Thornton International will donate US$5 to UNICEF for every completed IBR questionnaire. In 2008, this will result in a donation of over US$39,000.

The research was conducted by Experian Business Strategies Limited. To find out more about IBR and to obtain details of IBR reports and results please visit www.internationalbusinessreport.com.

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