As geopolitical tensions and macroeconomic uncertainties continue to destabilise global markets, CEOs are recalibrating their strategic investment plans. Insights from the latest EY-Parthenon CEO Outlook survey reveal a significant shift in sentiment among 100 UK business leaders, with 43% identifying these uncertainties as the primary risk to achieving growth targets over the next year. Following the recent announcements regarding US trade tariffs, a staggering 83% have postponed planned investments, reflecting a cautious approach in this unpredictable climate.

The survey reveals a growing apprehension about potential tariff increases, with nearly half of respondents (45%) expressing deep concern about their operations and sales being adversely affected in the coming year. Alongside this anxiety, around 40% of CEOs indicate they are moderately concerned. This anxiety has prompted strategic shifts: a quarter of those surveyed have either halted planned investments, while nearly half have chosen to delay them. Notably, 39% have opted to relocate operational assets to different geographic areas, and 26% have exited specific markets altogether.

UK CEOs perceive the US-China and US-UK trade disputes as particularly detrimental, with 27% and 24% of respondents citing these disputes as major concerns for their business activities. In light of these challenges, many leaders are proactively adjusting their strategies. Almost half (48%) are diversifying their supply chains, seeking non-tariff regions for production or sourcing, while 44% are considering domestic sourcing alternatives. Additionally, some intend to absorb rising costs through operational efficiencies, with around 32% indicating they will pass these costs onto customers.

Industry leaders recognise that navigating such a turbulent landscape requires agility and innovation. Silvia Rindone, Managing Partner for EY-Parthenon in the UK and Ireland, commented, “CEOs are navigating an extraordinary combination of structural, political, and economic headwinds that are reshaping the landscape for traditional forecasting." She emphasised that adaptability—whether through supply chain diversification or technological integration—will be crucial for companies aiming to thrive amidst current pressures.

Interestingly, looking forward, an overwhelming 97% of UK CEOs intend to pursue transaction initiatives in the next 12 months, with 60% focusing on mergers and acquisitions (M&A). Acquisition strategies are geared towards gaining access to new technologies or intellectual property (37%) and enhancing operational capabilities through complementary businesses (35%). Nonetheless, there is a notable caution present; three-quarters of CEOs are aware of a growing valuation gap between buyers and sellers, which they believe will hinder M&A recovery in the year ahead. Additionally, 83% of CEOs are now implementing AI-driven technologies into their M&A processes, suggesting a forward-thinking approach to strategic growth.

The concerns and actions highlighted in the survey resonate with broader findings from other reports. For instance, KPMG's own 2023 CEO Outlook indicates a similar reassessment of strategic priorities driven by ongoing global instability. While many CEOs remain optimistic about their future prospects, they are still adjusting to heightened stakeholder expectations regarding environmental, social, and governance (ESG) issues.

PwC's 26th Annual Global CEO Survey presents an even grimmer outlook, with 73% of CEOs fearing global economic growth will decline over the next year, the most pessimistic sentiment recorded in over a decade. This aligns with recent findings that suggest a significant percentage of global CEOs believe their organisations may not remain economically viable in a decade unless substantial changes are made.

As the uncertainties of global trade disruption continue to play out, leaders in the UK and beyond will need to stay strategically focused. Rindone summarised a prevailing sentiment: “CEOs that can remain strategically focused while others pull back could emerge stronger with a better market position and faster growth once the economy recovers.”

In sum, the evolving landscape of global trade and investment compels CEOs to adopt a resilient and flexible approach, prioritising strategic adjustments that will not only safeguard their current operations but also position them well for the future.

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Source: Noah Wire Services