MID-SIZED businesses are displaying reserved optimism about an economic recovery, according to the latest figures from Grant Thornton’s International Business Report which gathers responses from nearly 5,000 business leaders in 29 economies including the G20.
This follows a challenging year, in which mid-sized companies saw their revenue decrease by an average of one percent globally after they factored in the impact of Covid-19.
In the Philippines, economic optimism among mid-market businesses has further decreased over the past six months with the research finding that 49 percent of businesses have a slightly or very optimistic economic outlook for the next 12 months. This five percentage point decrease is only a slight contrast to six months ago when the government mandated lockdowns saw economic optimism fall to the lowest level since 2016.
With optimism steadily sinking among the mindset of mid-market leaders, other key indicators are also sluggishly turning downwards with 43 percent of businesses expecting revenues to increase over the next 12 months (-2 percentage points on the first half), along with profitability (47 percent -3 percentage points). On the other hand, employment increased (51 percent +6 percentage points). However, all will remain well down on pre-Covid 2019 levels.
“While the outlook is showing real improvement with both economic optimism and expectations around revenue and profits on the rise, it is important to note the context of these increases. In many cases the improvements we are seeing are due to firms benchmarking the next 12 months against the very depressed economic environment of 2020 due to Covid-19,” said Marivic Españo, chief executive officer and chairperson at P&A Grant Thornton.
Uncertainty at elevated levels
The research also showed that economic uncertainty remained at elevated levels, with 53 percent of businesses in the Philippines citing it as the number one constraint on their ability to grow their business. Businesses also cited shortage of orders, availability of skilled staff and labor costs as other stumbling blocks for growth.
Meanwhile, the study also revealed that firms expect research and development to increase this year followed by staff skills and technology as businesses continue to retool for a new world of business.
With second and third waves of Covid-19 hitting many markets, the need to invest in enhancing an existing product portfolio, digital business models and having people with the skills to operate in a virtual world for the foreseeable future continues to drive investment decisions.
Additionally, the study saw less traditional investment categories come to the fore. The percentage of mid-market companies looking to increase investment in new buildings decreased four percentage points to 39 percent, while the percentage of mid-market companies looking to increase investment in plant and machinery increased four percentage points to 46 percent, respectively.
Meanwhile, shortage of finance remains a significant concern for businesses, with 47 percent of firms identifying it as a business constraint over the next 12 months. This is despite record monetary easing and fiscal support provided by the government to businesses in the country as they attempt to alleviate cash flow constraints arising from Covid-19.
In preparation for recovery, mid-market companies around the globe are prioritizing the “use of technology to support organizational recovery” and looking at “workplace safety and new workplace regulatory requirements”—with 39 percent of global companies planning or implementing strategies in these areas. (PR)
As published in SunStar Cebu, dated 28 January 2021