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Confidence of world’s leading chief executives dented by eurozone crisis

PwC survey finds even fast-growing emerging market economies have been caught up in the gloom

The continuing crisis in the eurozone has dealt a damaging blow to the confidence of the bosses of some of the world’s biggest companies, according to a survey by PricewaterhouseCoopers which set a gloomy tone to the start of the World Economic Forum in Davos.

PwC said there was a decline in the optimism of chief executives from the levels recorded a year ago and that while the biggest decline in confidence was in western Europe, the dent in optimism was apparent right across the globe – and a stark contrast to a year ago when confidence was on the rise.

“The bottom line is that chief executives are not very confident about the global economy,” said Dennis Nally, chairman of PwC. He said that chief executives were no longer predicting a return to the economic conditions that existed before the financial crisis.

Asked why highly paid chief executives had not spotted this downturn a year ago, Nally said there were many interconnected issues and also cited regulation as an unpredictable factor.

Even fast-growing emerging market economies have been caught up in the gloom, with short-term confidence falling in the Asia Pacific region, where China was hit hardest.

But overall the biggest slump in confidence is in western Europe, where the sovereign debt crisis is having a serious impact. Just a quarter of the chief executives polled were confident about revenue growth, compared with 40% a year ago.

“The results demonstrate how interconnected and aligned the global economies are, right across the world. CEOs everywhere are worried about the eurozone and what this means for the global economy,” added Nally. Chief executives are expected to increasingly focus on their own markets, restricting cross-border mergers and acquisitions – in contrast to the previous two years.

Nearly half of the 1,258 chief executives polled by PwC believe the economy will decline even further in the coming 12 months while just 15% said that the global economy would improve. Some 80% were concerned about the state of the global economy.

The survey found that chief executives were confident about their own abilities to expand their own businesses – and expected to increase their headcount in the next 12 months. Some 18% of chief executives, however, said they were going to cut their workforce.

Nally said some chief executives were also concerned about a “skills gap”, even among graduates.

PwC said instability has become the “status quo” with cash balances at an all-time high in preparation for the difficult economic conditions. “CEOs have risk strategies in place,” he said, and no longer expect a return to the conditions that existed before the financial crisis.

“CEO confidence is decidedly down as they deal with the aftershocks of the recession. CEOs are disappointed with the course of the global economy and the pace of recovery. The optimism that had been building cautiously since 2008 has begun to recede.”

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