Business optimism drops globally

32% of businesses are confident about the economic outlook for the next 12 months (compared to 39% at the end of 2018).

At June 2019, the percentage of optimistic Italian businesses accounts for 36%, against a European average of 26%.

50% of Italian businesses is planning to increase R&D investment in the next year, while 52% are planning to increase investment in technology, a significant improvement compared to 37% registered in 2018. In 2019 Italy ranks 52nd among the world’s countries that most invested in technology.

Milan, 29 July 2019 – According to the latest Grant Thornton International Business Report (IBR), a global survey conducted on senior executives of more than 2,500 companies operating in the mid-market, the first six months of the year registered a drop in business optimism (from 39% to 32%) as concerns the economic outlook for the next 12 months. Expectations on revenues, profits and employment declined to 2016 levels.

Economic uncertainty is still very high and almost half of businesses (46%) identifies it as a hindrance to growth and, according to 25% of businesses, the current policy on tariffs is among the main limits to international expansion. Future outlooks are then negatively impacted, in general, by the weakness of financial markets and the increase in energy prices, such as oil prices, which grew by more than one third in 2019.

In this uncertain scenario, businesses prefer to invest in the quality of products and services, rather than to increase their size. In fact, 45% of global businesses are planning to increase R&D investment in the next 12 months. And R&D investment grew by 36% globally, the highest level ever registered since 2010.

From a more local perspective, Grant Thornton’s IBR results show that optimism in Europe, though remaining low, has registered better results compared to the world’s average and declined only slightly to 26% in semester 1 2019, compared to 28% registered in the second half of 2018. Europe is still hindered by the continuing squeeze on jobs. 43% of EU businesses identify the lack of qualified workers as a hindrance to growth, and this trend has been constantly increasing since 2016, when it amounted to 19%. This opinion is more common in developed European countries.

As concerns Italy, 36% of businesses are confident that the market will grow in the next 12 months.

Next year, 50% of businesses will increase their R&D investment, while only 6% are going to decrease it.

Investment in technology registered a constant increase. In fact, 52% of Italian businesses are planning to increase such investment, thus showing a significant improvement compared to 37% registered in 2018. This is a good sign, considering that in 2019, Italy ranks 52nd among the countries making the highest investment in technology.

According to Alessandro Dragonetti, Managing Partner and Head of Tax at Grant Thornton: “After a highly optimistic period and a strong economic growth registered in 2018, business optimism at a global level saw a decline, due both to the uncertainty of financial markets in the first six months of 2019, and to the uncertainty of the current political scenario.

Despite a pretty complex general picture, Italy is responding well and the expectations on R&D investment are a clear sign thereof, particularly as concerns the Italian mid-market sector, a pillar of Italian economy.

In fact, according to some results of Grant Thornton IBR – declares Alessandro Dragonetti – current global mid-market executives believe that the most important attribute for a business leader in 2030 will be to be innovative – cited by 20% of respondents; compared to the 16% who believe this is required today.

This is just the right moment to invest in the future, a moment in which the idea of “investment” is evolving in an idea that goes beyond its economic meaning. Business management is therefore required to focus on human skills, acting on all intangible assets that have become crucial for growth and, above all, for the safeguard of the business in the long run.”