CFOs see opportunities for growth in 2015

More than 60% of European CFOs are more positive about the economy than in the previous quarter. Only 12% are less optimistic. It was the first time in the 77 quarters that the CFO Survey has been conducted that the difference between the number of optimists and those who are less positive is so large. This is the outcome of the CFO Survey Europe, an initiative of TIAS School for Business and Society (Tilburg, the Netherlands) and Duke University (North Carolina, U.S.A.).

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European companies say they have generally benefited from recent developments in interest rates and oil prices. Even though these are no immediate reasons to invest or to hire additional staff. Nevertheless, the outlook regarding employment has been greatly improved compared to the past four years. 

Optimism among CFOs in Europe

The number of optimists among European CFOs has never before been this high. In the second quarter of 2015, 61.5% of financial directors say they are more positive about the economic outlook, while only 11.9% of CFOs are less confident about the economy. This promising trend started in the fourth quarter of last year and the number of optimists has steadily continued to grow. The average level of optimism has increased from 58 to 60 (on a scale of 0-100), and thus gradually falls in line with that of the United States and Asia (both 63), two regions which are often seen as the motor of the world economy. 

The European financial directors are also positive about their companies’ prospects. Both the number of optimists and the average level of optimism remains strong for the second quarter of 2015. The overall positive sentiment is reflected, among other things, in an expected productivity growth of 4.7% for the next twelve months. For the first time in four years, the signals concerning employment are also positive again. After a long period of very marginal growth and contraction, the current expectation is that the number of permanent contracts will grow on average by 2.3% in the next twelve months. There will also be an increase in outsourcing work (an expected average growth of 5.9%). 

Growth potential in 2015

Recent developments on the interest, currency and oil markets have, directly or indirectly, affected more than half of European businesses. In addition, the low interest rates have had a positive effect in 60% of the cases and the lower oil price has contributed positively in almost half of the cases. Developments in exchange rates on the other hand have had a negative impact on European businesses in more than 50% of the cases. 

Nevertheless, a majority of European CFOs says that these developments have not had an impact on their investment and employment plans for the coming 12 months. However, 2015 is considered to be a year of potential growth. More than half of the financial directors says, for example, that they see more growth opportunities compared to 2013 and 2014. 

To realize growth, 60% of European businesses will especially focus on increasing market share through already existing products or services in their portfolio in the next three years. "This is quite remarkable when you consider that the average European CFO expects that within five years about 30% of competitive pressures will come from new market entrants that introduce disruptive innovation in technology and business models. It would therefore seem obvious that the current companies themselves should opt for a strategy which focuses more on innovation in products and services and allows them to continue to face the competition in the future," says Kees Koedijk, dean and director of TIAS School for Business and Society.