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From crisis to battle: Czech CEOs have healthy scepticism

PwC Czech Republic again follows up on the traditional Global CEO Survey by asking Czech CEOs about their perspectives for this year, the motto is “From crisis to battle”...

ČESKY: Z krize do bojů: zdravý skepticismus českých generálních ředitelů

Almost half of global CEOs are very confident about their companies’ growth prospects this year, whereas only 13% of Czech CEOs are that optimistic. The good news is that this number has doubled compared to the previous year. We can also see growth in the number of those who are somewhat confident about growth, at almost 57%. The growth expectation of the vast majority shouldn’t be threatened by the lower volume of state contracts due to the government’s effort to reduce the rising public debt. Prudent fiscal policy is generally welcomed by CEOs. However, almost half believe that the current government coalition will survive to the next regular election.

“A PwC survey among CEOs of top Czech companies shows that while immediately after the crisis in 2010, Czech CEOs expected their companies to start growing in the medium-term, in 2011 they seem to be fully aware of all the risks and challenges that go hand-in-hand with the fragile recovery “, said Jiří Moser, Country Managing Partner of PwC in the Czech Republic.

Our market, our ideas, our capital..
The largest number of Czech CEOs (46%) believes that the main opportunity for business growth lies in their current markets. Twice as many CEOs plan to focus on growing their business domestically this year compared to those planning to expand to foreign markets.

“Less than a third of global CEOs see high growth potential in the country where they are based. Emerging economies like China, India and Brazil are growing at rates that far surpass the developed nations. The shift in the economic balance of power creates challenges for CEOs in deciding how and where to invest in facilities, people and innovation" commented Dennis M. Nally, Chairman of PwC International.

Another hint for business growth, according to Czech CEOs (42%), lies in innovations: the development of new products and services was the second most frequently listed. The majority of companies (70%) plan to finance their business growth from own cash flow. About 20% continue to rely on bank lending. Other approaches to financing are off the table.

During the economic crisis, bank lending was restricted by financial institutions due to concerns over the ability of businesses to repay their loans; now it is businesses who are concerned about the same issue, hampering banks’ efforts for renewed expansion into corporate lending. More than 75% of Czech CEOs are still at least somewhat concerned about a protracted economic recession. Hence, cost optimization has still been at least medium priority for almost 90% of CEOs. They are also highly concerned about energy and material costs, as well as volatile exchange rates.

“Cost pressures and efforts to achieve maximum efficiency are not just a weapon to use in the current economic difficulties. Along with innovation, they become a long-run strategy of successful businesses“, added Jiří Moser.

More hire than fire
The good news is that 2011 should be the year of gradual stabilisation of the labour market. There are less than 2% of companies planning significant headcount decreases (more than an 8% decrease in headcount), one tenth the number of a year ago. The number of companies planning significant headcount increases (more than an 8% increase in headcount) dropped as well; however, in total, there should be a larger number of companies increasing headcounts (41%) than decreasing (34%). But it must be noted, more than half of Czech CEOs (58%) are concerned about the limited supply of candidates with the right skills.

The actual stability of the Czech government is less clear. Less than half of CEOs (47%) believe that the current government coalition will survive until the next regular election, 30% can’t say and some 25% of CEOs do not believe that the coalition will survive.