TORONTO--()--Business optimism fell sharply across the globe in the third quarter of 2012, according to the latest Grant Thornton International Business Report (IBR). Despite attempts to encourage investment, the majority of businesses say that they will maintain or increase their cash reserves – building on the $4 trillion of cash already sitting on company balance sheets1. To get their economies moving, the majority of the 3,000 businesses interviewed want their governments to increase fiscal activity – something which might boost investment.
“While business around the world spend their time building cash reserves, it’s clear that one of the biggest issues impacting Canada’s ability to generate future growth is labour”
Globally, business optimism has fallen from 23% to 8% in Q3. Drops in confidence across the world’s three largest economies have been equally pronounced. In the US, the Presidential election and the looming ‘fiscal cliff’ are weighing on decision making, optimism for the next 12 months fell from 50% to 19%. In China confidence fell from 33% to 11% as the marked slowdown, particularly in exports, hits the economy. And with hopes receding that recent pronouncements by the ECB would put an end to the eurozone crisis, optimism across the EU fell from -2% to -13%.
Canadian optimism falls but Canada remains among most optimistic
In Canada, the balance of optimism (that is, those who are optimistic less those who are pessimistic) stood at 54% in the third quarter, down from 70% in the previous quarter. Even with this drop, Canada still sits in the top ten most optimistic economies surveyed, and stands in stark contrast to the US at net 19% and the UK at net -12%.
Barriers to growth in Canada
A shortage of skilled workers (38) and regulations/red tape (29) continue to be cited as the top two constraints to growth. In particular, just over half say the shortage of skilled labour is forcing them to make do with less and is increasing their expenses.
Impact of eurozone on Canadian businesses
When asked how severe an impact the eurozone financial crisis has had on business, 69% of Canadian businesses said it has had no impact, while 20% said it has had a negative impact. However, 88% said that it wouldn’t affect plans to do business in Europe.
Other Canadian findings in the third quarter research results
- 61% of Canadian businesses surveyed are concerned or very concerned that the global economy will go back into recession in the next 12 months
- 80% agree that Canadian businesses should focus more on a global approach and less reliance on the United States
69% are very or somewhat concerned about the high Canadian dollar, but
the number who say they are “very concerned” shows significant
- 15.7 % of businesses in the West are very concerned
- 21.5% of businesses in the East are very concerned
- only 9.2% of businesses in Ontario are very concerned
- 37% are holding more than ten percent of revenues as cash reserves
- 18% plan to increase their cash reserves in the next 12 months, while 61% say reserves are likely to stay the same—this is in stark contrast to global figures, which show that 80% of businesses expect to either maintain or increase their cash reserves over the next 12 months
The role and expectations from governments
The IBR reveals that businesses on a global basis are looking for greater fiscal stimulus in the way of tax incentives and an increase in government spending and investment, as opposed to further monetary measures. Globally, 68% of businesses called for more tax cuts and breaks whilst 48% of businesses said they want to see an increase in government spending and investment. In Canada, however, the focus was more consistent with concerns around skilled workers. Respondents called on the Canadian government to improve education in order to enhance the skills of the workforce, and for changes in employment policy that would get the long-term unemployed back to work.
Which, if any of the following areas would you like [the
Taxes (eg. individual or corporate tax cuts or breaks)
Improve education (eg. enhancing skills of workforce)
Employment policy (eg. getting long-term unemployed back to work)
Improve access to finance (eg. government guarantees)
Fiscal measures (ie. increase government spending and investment)
Monetary measures (eg. lower interest rates)
Currency market (ie. devaluation)
Increase protectionism (ie. increase tariffs and quotas)
Lower barriers to trade (ie. decrease tariffs and quotas)
“While business around the world spend their time building cash reserves, it’s clear that one of the biggest issues impacting Canada’s ability to generate future growth is labour,” says John Harris, Partner and National Leader of Privately Held Business at Grant Thornton LLP in Canada. “And while the Minister of Finance and Bank of Canada Governor have stated that the government has done all they can to stimulate growth through fiscal measures, more could be done by businesses to take advantage of all their strengths and invest, to create jobs and grow the Canadian economy.”
“Reason might tell business leaders to be cautious in the face of an uncertain global economy. But instinct might say that Canadian businesses are well positioned to grow their businesses in many ways, whether to improve financial results, or to pursue multiple channels for growth as part of an overall integrated growth strategy”.
NOTES TO EDITORS
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of more than 12,000 businesses per year across 41 economies. This unique survey draws upon 20 years of trend data for most European participants and 10 years for many non-European economies. For more information, please visit: www.internationalbusinessreport.com
Data collection is managed by Grant Thornton International's core research partner, Experian. Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis. The research is carried out primarily by telephone.
IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 3,0 businesses from all industry sectors across the globe conducted in August/September 2012. The target respondents are chief executive officers, managing directors, chairmen or other senior executives.
ABOUT GRANT THORNTON LLP IN CANADA
Grant Thornton LLP is a leading Canadian accounting and advisory firm providing audit, tax and advisory services to private and public organizations. Together with the Quebec firm Raymond Chabot Grant Thornton LLP, Grant Thornton in Canada has approximately 4,000 people in offices across Canada. Grant Thornton LLP is a Canadian member of Grant Thornton International Ltd, whose member firms operate in close to 100 countries worldwide. www.grantthornton.ca
Any and all references to Grant Thornton International are to Grant
Thornton International Ltd.
Grant Thornton International is one of the world's leading organisations of independently owned and managed accounting and consulting firms. These firms provide assurance, tax and specialist business advice to privately held businesses and public interest entities. Services are delivered independently by the member and correspondent firms within Grant Thornton International, a non-practicing, international umbrella entity organised as a private company limited by guarantee incorporated in England and Wales. Grant Thornton International does not deliver services in its own name or otherwise. Grant Thornton International and the member firms are not a worldwide partnership.
1 Hogan Lovells research into total cash on the balance sheets of the world’s top 500 non-financial companies: http://www.hoganlovellsevolution.com/evolution-heatmaps-cash-on-balance-sheet