Uncertainty increases but growth, skills availability and resilience on the Irish agenda according to PwC’s 2020 Irish CEO Survey

PwC’s 2020 Irish CEO survey published today reveals that uncertainty about the future prospects for our economy has increased, with last year’s cautious optimism turning to a more pessimistic tone. Growth, however, remains on the agenda with many Irish CEOs believing their organisations will remain resilient for whatever the future holds. A majority of CEOs (67%) are confident about their organisation’s revenue growth and nearly half of respondents (47%) plan to hire more people in the year ahead.

This survey, now in its 23rd year, is a global analysis of business leaders’ sentiment, including the views of 125 Irish CEOs in a study conducted in September and October 2019 and prior to Covid-19 having hit the general consciousness.

Feargal O’Rourke, PwC Ireland Managing Partner, commented about this year’s report: “Ireland is bucking some global economic trends – our economy is performing well, unemployment is at almost record lows and foreign direct investment remains strong. But it is not surprising, given all that is going on globally that business confidence in Ireland has fallen so dramatically. 

“There is confidence behind this caution, there are resilience and realism in equal measure at a time of global uncertainty. CEOs have lost little of their belief in the potential of their own businesses to succeed. 

“Ireland needs to ensure that we remain encouraging to local business, attractive to overseas investors, and continue to prepare for Brexit, good and bad.  Continuing to think beyond the challenges and invest in these important areas to ensure business models are fit for a digitally-enabled sustainable future will be critical.”

Ireland retains its resilience despite risks about uncertain geo-economic growth and global challenges

From this year’s results, it is clear that last year’s cautious optimism for the future has been replaced by increasing pessimism. Just 16% of participating Irish CEOs are favourable about the outlook for Ireland’s economy in the year ahead, down from 57% at the same time last year, and is the lowest level of confidence in the Irish economy since 2009 when it was just 3%.

Similarly, the number of Irish CEOs feeling unfavourable about the outlook for Ireland’s economy fell to 61% in 2020, down from 25% last year.  This sentiment aligns with that of Global CEOs also interviewed for this survey.

At the same time, growth remains on the agenda with many Irish CEOs believing their organisations remain resilient.  The majority (67%) remain confident about their organisation’s revenue growth in the year ahead, albeit this has fallen from 84% last year and is the lowest level we have seen since 2013.  Almost one in two (47%) plan to expand headcount in the year ahead, down from 63% last year.

Threats around uncertain economic growth (84%), geopolitical uncertainties including Brexit (81%) and climate change/environmental damage (74%) have all become much more acute compared to last year –  levels of concern are also higher than global counterparts. Other concerns include the shortages of key skills (78%), cyber threats (78%) and over-regulation (71%).

According to the survey, Ireland’s CEOs continue to invest in and innovate their businesses despite the uncertainties: A key route to growth is making operational efficiencies – 66%, up from 54% last year – and a similar proportion plan on launching a new product or service.  Just over a third (34%) plan a new strategic alliance/joint venture/merger or acquisition. And in spite of Brexit, 95% of those surveyed said that they intended to increase or maintain their investment in Ireland.

Complex threats and data privacy challenges shaping cybersecurity solutions

Privacy in cyberspace, or lack thereof, is one of the greatest business and social issues of our time. The increasing complexity of cyber threats (78%) and data privacy regulations (63%) are having the greatest impact on shaping cybersecurity strategies.  CEOs are predicting significant regulatory changes in this space.

Robert Byrne, Partner, PwC Ireland Advisory Consulting Practice, said: “While CEOs continue to have concerns about the threat of over-regulation, they are also predicting significant regulatory changes in the technology sector. The majority of Irish CEOs are of the view that governments will introduce new legislation to regulate content on both the internet and social media (76%) and to break up dominant tech companies (56%).  Over one in two (57%) also predict that governments will increasingly compel the private sector to financially compensate individuals for the personal data that they collect.” 

Ireland still more concerned about the skills shortage, more focus on upskilling needed

Irish CEOs have been more concerned than their global counterparts about the shortage of key skills for 7 years running (since 2013).  This year, 57% of Irish CEOs say upskilling employees is the most important action to close the skills gap in their organisation, up from 30% last year.

However, they are not making much headway in tackling the problem with only 12% saying they have made ‘significant progress’ at establishing an upskilling programme that develops a mix of soft, technical and digital skills.

Doone O’Doherty, Partner for PwC Ireland People & Organisation practice said:  “Our survey also suggests that there is scope to increase the effectiveness of upskilling programmes: for example, less than a quarter  (22%) of Irish survey respondents reported that their upskilling programmes are ‘very effective’ in reducing the skills gaps and on improving talent acquisition and retention.  But to retain employees, companies must also do more than go through the motions of upskilling: they need to give their talent the opportunity to do good work.”

Ireland significantly behind global counterparts on assessing climate change risks

Irish CEOs are significantly more concerned about climate change risks and environmental damage (74%) than they were last year (56%), leaping to a top 5 challenge from 12th position last year.  The survey also highlights significant disparity between attitudes of international business leaders and Irish counterparts: less than one in two Irish CEOs surveyed have assessed the potential physical impacts of future climate events to their organisation (44%) and transition risks (40%) to a ‘greener’ economy which is concerning – and significantly behind global CEOs: 56% and 64% respectively.

Kim McClenaghan, Partner, PwC Ireland Energy, Utilities and Sustainability Practice, said: “Compared to a decade ago, when we last asked this question, Irish respondents are now twice as likely to agree that investing in climate change initiatives will lead to significant new product and service opportunities for their organisation (50% in 2020 compared to 26% in 2010). However, Global CEOs (63%) are much more likely to see the benefits – take for example China where this number is as 91%.” 

According to the survey, just three out of ten participating Irish CEOs agree that collaboration among governments and businesses is more effectively mitigating climate risks (Global: 36%).  Just 39% agree that their organisation will benefit from government funds or financial incentives for ‘green’ investments.

McClenaghan continues: “It is critical that companies robustly assess their operating model from a climate risk perspective and test their business strategies against a number of potential future climate scenarios. This is necessary as climate ambition will only be supported when built off a strong financial base. Many large international companies have committed to net zero, and even negative emissions by 2030 which raises the bar for Irish companies and sets expectations locally for customers, employees and investors.”