Export expectations drive business optimism to new high
New research from the Grant Thornton International Business Report (IBR) has uncovered an unprecedented boost in plans to increase exports, driving levels of business optimism to record highs. The growth in business optimism is particularly high in Europe and North America, and seems to be driven by increasing export growth expectations. The findings highlight the ongoing need for policymakers to work together to lower trade barriers and foster business environments which encourage cross-border activity and bolster the global recovery.
The IBR has found that globally, business optimism has risen to net 46%, a record high. The surge in optimism is being driven by increasing confidence in the European Union (at 43%, the highest since 2006), North America (at 73%, the highest since 2004) and the G7 (at 53%, another record high).
This positive sentiment about the economic outlook is being fed by record-high expectations over exports; globally the proportion of businesses expecting exports to increase over the coming 12 months (24%) has only been equalled once before, in 2011. In the G7, a record 23% of businesses expect to grow exports over the next 12 months.
Ed Nusbaum, global CEO at Grant Thornton, commented: “The widespread expectation for export growth is welcome as it is feeding levels of business confidence we have not seen in more than a decade. As economies continue to recover from the financial crisis, business leaders are sensing real opportunities to go overseas and capitalise on other markets.
Growing middles classes in Asia are creating new and expanding markets for goods from advanced economies, and the rise of technology at home and in the workplace is feeding demand for cutting edge products and services. These are exciting times for business leaders, and the focus on exports is a clear sign to policymakers that cross-border trade is critical to the long-term health and success of their operations and the wider economy.”
Expectations for increasing exports are particularly strong in Asia Pacific (27%), where businesses in China are particularly bullish about selling more overseas (36%), and Europe (31%) where Germany (47%) and the UK (34%) are amongst the most confident both as regards their respective economies and their export growth potential. Expected export growth in southern Europe (32%) is also notable with businesses in Spain (40%) and Greece (38%) in the top five most confident about growing exports globally.
Ed Nusbaum commented: “Exporting is a particular focus for Europe at the moment: regional growth remains tepid at best so businesses are increasingly looking further afield. Big German brands, particularly those in the automotive sector, recognised the potential in high-growth markets such as China long ago, but businesses in Spain, the UK and elsewhere are following their lead.
"For policymakers, the message is loud and clear that businesses need to be able to export in order to fuel growth and recovery. At a World Trade Organisation meeting in Bali last December, landmark commitments were made to boost trade around the world by breaking down bureaucracy and simplifying procedures for doing business across borders.
This was a positive step, one which could add an estimated US$1trillion to world trade, and I hope to see further progress on the Trans-Pacific and Trans-Atlantic trade partnerships in the months ahead. Export subsidies, a reduction in red tape and greater support to firms looking to export more are all tools that can and should be deployed where possible to support cross-border trade. Of course businesses need to be regulated properly, but as part of a system that encourages rather than discourages firms to go overseas."
Tied to the growth in business optimism and intentions to export is a growth in plans to increase spending on research and development (R&D). Globally, 28% of business leaders plan to increase R&D spending over the next year, the highest figure ever recorded. Over the last quarter R&D expectations have increased by 13 percentage points in Asia Pacific, 5 pp in the EU, 7pp in North America and 6pp in South East Asia.
Ed Nusbaum added: “Increased R&D spending indicates businesses are looking forward and thinking about the long-term development of their goods and services catering for different markets and tastes. But it also reflects business leaders’ plans to export more. As more of their products and services go overseas, better knowledge of those new marketplaces becomes more important. R&D spending shows that firms are eager to develop goods which will help them gain footholds overseas and ultimately deliver growth.”