The Economy

Europe’s CFOs Betting on Recovery

The latest Duke University/&splt;i>CFO&splt;/i> Magazine Global Business Outlook Survey shows signs of optimism and recovery among European compani...
Andrew SawersDecember 11, 2012

Keep very quiet or you might scare away the recovery.

There are, we can dare to hope, a few signs that the European economic environment is looking just a little bit healthier, with businesses making more positive noises about their own prospects and investment plans. These crumbs of comfort are to be found in the latest quarterly survey of senior finance executives conducted by Duke University’s Fuqua School of Business and CFO magazine, working with Tilburg University in Europe.

Kees Koedijk, dean of the Tilburg School of Economics and Management in the Netherlands, says the survey of finance executives is showing a few positive signs: “You have to look carefully but they are out there,” he says. “It looks like the recession has bottomed out. Optimism is rebounding in Europe, so it looks like we will see a modest recovery.”

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In Europe, the fourth-quarter survey gathered data from 126 companies across the continent, with executives from the United Kingdom, the Netherlands, Germany, Russia, and Sweden constituting just under half the respondents. (Full details of this quarter’s Global Business Outlook Survey — including the results from the United States and Asia — will be published on December 12 at

Koedijk’s explanation is that “there has been pretty intense cost-cutting in major industries,” which has left companies in a good position to weather the storm and to benefit from any upturn. “Also, it looks like we’re muddling through with Greece. The major uncertainties regarding the euro system are diminishing.”

To be honest, the “big picture” numbers aren’t yet very encouraging. When asked, “Are you more or less optimistic about your country’s economy compared to last quarter?” just 22.4% answered they were more optimistic, a 2.5 percentage point increase from the September survey. Offsetting that, however, was a 2.2 percentage point increase to 48% in those who were less optimistic. Overall, therefore, there was virtually no change in the net figure of -25.6%.

Better news, however, came when survey participants were asked about the financial prospects for their own company. Those who were more optimistic, at 36%, outnumbered those who were less optimistic, 28.8%.

Koedijk cautions that it is “human nature” for people to respond more positively about their own company — whose fortunes are to some extent within their control — than about the economy as a whole. “It’s why some companies survive: they see their own opportunities,” he adds. However, despite the built-in bias in the statistic, there are still some favorable signs in the numbers: the optimists grew by about 8 percentage points since last quarter, while the pessimists fell by 8 percentage points. Moreover, the result is much more positive than a year ago, when pessimists outnumbered optimists 47% to 23%.

Looking deeper into the survey results, consumer demand is still by far the biggest external issue faced by European companies, with almost 50% listing it as a “top three” concern. Second on the list was global financial instability (38%), followed closely by price pressure from competitors (34%), both concerns having increased a few percentage points over last quarter.

As for the top three issues internal to respondents’ companies, the biggest one remains the ability to maintain profit margins, which almost three-quarters (73%) said was a “top three” concern. The ability to forecast results was in distant second place (35%), followed closely by working capital management (33%).

In the “key internal concern” responses, however, there was an additional glimmer of hope: lying at fourth place was worries over attracting and retaining qualified employees (32%, up 4 percentage points). “Normally that’s the top concern in a boom. If that picks up, it tends to be a good sign,” Koedijk says.

During the next 12 months, companies surveyed are expecting revenue growth of 4.7%. Earnings growth is expected to be almost flat (0.8%), but there is evidence that businesses are reinvesting in themselves. Capital spending is expected to rise by 3.5% after a two-quarter slump, while advertising and marketing spend is also likely to increase, by 2.1%, the most bullish forecast in more than a year. The outlook for growth in full-time employees is still negative but slowing, at -0.6%.

Expected dividend growth has been consistently positive over the past year and remains so at 2.9%. “Increasing the dividend is really about signaling,” Koedijk says. “There are many companies that are in bad shape but there are also a lot of companies which are in pretty good shape and have done a lot in terms of cost-cutting and really can see this recession through. In that spirit, paying dividends in a consistent way is a kind of signal of strength.” Если вы хоть раз играли в онлайн казино, то у вас наверняка имеются несколько любимых автоматов. Большой выбор игровых автоматов привлекает геймеров. Они представлены на любой вкус: все виды рулетки и блекджека, кости, баккара, покерные игры и т. Онлайн казино набирает обороты в интернете и Казино Х тоже не стоит на месте, предлагает большой выбор игровых слотов. В Казино Х всегда большой выбор игровых автоматов и пополнения их происходят довольно часто, причём сюда попадают только самые лучшие, с хорошей графикой и отличным софтом. Большой выбор игровых автоматов и разработчиков софта.

It’s natural to be somewhat skeptical of these findings. But almost 60% of companies that have made cuts in hours-worked-per-week in the past six years have already restored them to prerecession levels or plan to do so in 2013. Similarly, almost 42% have or will bring spending on employee training and development back to prerecession levels. “Companies are signaling that they have seen the worst of this recession,” Koedijk says, “and that they are planning ahead to attract more qualified workers.”

Andrew Sawers is editor of CFO European Briefing, a CFO online publication.

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