Optimism at an all-time high but skills shortage threatens

Global survey finds growing workplace skills shortage as possible threat to booming business optimism.

• Global business optimism hits all time quarterly high of +51% - five consecutive quarters of increases;
• US business optimism hits an all-time high of 81%, EU reaches two-year high at 50% and China remains at near three year high 48%;
• Plans to increase hiring over next year reaches record level of 36%;
• But percentage of businesses who identify a lack of skilled workers as a constraint has increased to just over one in three (35%) - highest quarterly level ever.

New figures from Grant Thornton’s International Business Report (IBR), a long-running global survey of 2,500 businesses in 36 economies, reveal that while business optimism is rising to new quarterly highs, a storm may be brewing in the shape of a skilled worker shortage. In addition to high business optimism, the survey finds increases in revenue and profitability expectations. However, growing fears over workforce skills could impact confidence.

The findings show that global business optimism hit at an all time quarterly high of +51%[1] in the second quarter of this year. This represents five consecutive quarters of increases in optimism. Healthy confidence is evident in the US, where optimism has hit an all-time high of 81%; in the EU, which has jumped to a two year high (50%); and in China, where optimism remains at 48% - a near three year high.

Underpinning this, global revenue expectations also equal their all-time quarterly high of 56%, as do expectations around increased profitability (47%). However, a less welcome milestone is also set this quarter. The percentage of businesses who identify a lack of skilled workers as a constraint has increased to just over one in three (35%) - its equal highest quarterly level ever.

“According to the IBR findings, the global economy is recovering fast as business optimism levels reached the highest levels in the last 15 months, besides revenue and profitability expectations” comments Alessandro Dragonetti, Co-Managing Partner and Head of Tax of Bernoni Grant Thornton

The IBR data finds that globally, +36% of businesses expect to hire more staff over the next 12 months – another record figure.

“However, fears over the shortage of skilled workforce cannot be ignored, as they could undermine the positive outlook” continues Dragonetti. Actually, compared to 2016, fears that a skilled worker shortage will hamper growth have increased by 2 percentage points in Asia Pacific, 2pp in North America and 5pp in the EU so far in 2017.

Despite this, and even with increased profitability expectations at record highs, only one in five (20%) business globally plan to increase wages above inflation over the next 12 months – down 1pp on Q1 2017. One notable exception is Germany, where plans to award above inflation pay rises have leapt from 35% to 43%.

“Ability to attract talent is increasingly growing as a long-term issue business must address” adds Dragonetti. “Increasing wages is a short-term measure, but to acquire and maintain talent to drive future growth, businesses will need to look at professional training programmes, corporate welfare plans and collaboration with public institutions to devise training courses allowing young people to effectively accrue working experience during their school years.”