The quarterly Global Economic Conditions Survey (GECS) undertaken by ACCA (the Association of Chartered Certified Accountants) and IMA (the Institute of Management Accountants), highlighted continued uncertainty across the Asia-Pacific region, which is still feeling the effects of the economic downturn in China. China was not the source of this pessimism, but rather its neighbouring countries, who are suffering not only the Chinese downturn but the persistently sluggish recovery of Western economies.
In contrast, the survey saw a glimmer of hope in Western Europe, where respondents said that they had started to see the beginnings of a credible plan to resolve the region’s sovereign debt crisis, the promise of a more active role for the European Central Bank as well as continued efforts towards fiscal integration. The Middle East is now the most confident of the GECS regions, with 30 per cent of respondents here reporting an increase in confidence, while 52 per cent believe the state of the global economy is improving. Africa on the other hand, continues to slow down as it has throughout the year.
Capital spending fell around the world in Q3 2012. Growth has continued to disappoint, with just seven per cent of respondents reporting that their organisations planned to increase investment. However, the backlash against austerity is still evident, and attitudes towards public spending have shifted in favour of increased spending in major Western markets including US, Canada, UK and emerging markets such as China, Malaysia, and UAE.
Additionally, there appears to be greater cashflow stress at the global level, which appears to have grown particularly among small businesses, as well as large corporate’s and in public sector entities in emerging markets. This does not appear to be a result of fiscal policy, although this did make some difference to the opportunities available to private sector enterprises.
Survey editor Manos Schizas, Senior Economic Analyst with ACCA and report author said: 'This quarter has seen business confidence fall for all the right reasons. Around the world, and with few exceptions, the fundamentals of the business environment are deteriorating, and businesses are once again having the kinds of liquidity problems we thought we had put behind us.'
One theme that emerges clearly from the survey is the interconnectedness of the global economy. Raef Lawson, IMA’s Vice President of research commented; 'The slowdown in Asia; the Eurozone debt crisis; the sluggish US recovery; all are feeding into each other and no region is unaffected; in fact, the degree to which movements in the GECS indices are synchronised between regions is uncanny.'
Manos Schizas maintains that there are still many reasons to be optimistic, 'Europe’s debt crisis showed signs of being contained in the third quarter, at least for the time being, and finance for investment is being unlocked in many parts of the world.'
UK – National confidence rebounds
The UK saw confidence rebound slightly in Q3 2012, with 16 per cent of respondents reporting confidence gains. However, UK respondents were less upbeat about the prospects of the global economy; 76 per cent believing it is either stagnating or reversing.
UK respondents cited the London Olympics as providing a general feel-good factor, but stressed that overall economic conditions are still poor. The continued impact of government spending cuts, especially in local government, dominated responses.
Manos Schizas said: 'Respondents in the UK have gradually adjusted their expectations of fiscal policy over the past year, as the fragility of growth has become plain to see. While on balance they still expect austerity to hurt growth in the medium term, they now believe the UK’s trajectory is much more sustainable than they believed it to be in previous quarters.'
A senior manager of a UK based medium-sized firm described the issues which are affecting their business: 'Most of our revenue comes from the export of capital items (large projects). We have experienced a slowing in demand particularly from China and European countries. Our cash flows have been hit also by HMRC's aggressive drive to receive PAYE payments on time yet only issue VAT refunds right on the 30 day limit after submission of the return.'