Poor outlook pressures investment
Whilst many businesses in mature markets are being forced to focus on cost savings and the bottom line, investment sentiment remains buoyant in emerging economies.
According to Grant Thornton International Business Report entitled “The global economy in 2012: a rocky road to recovery”, in Latin America, 53 per cent of businesses expect to increase investment in plant & machinery over the next 12 months, 35 per cent in research and development (R&D) and 26 per cent in new buildings. Their ambitions are matched by businesses in Asia Pacific excluding Japan where 47 per cent expect to increase investment in R&D, 42 per cent in plant and machinery and 25 per cent in new buildings.
At the other end of the spectrum, expectations for investment in new buildings are lowest in the EU (11 per cent), exacerbated by low expectations in the PIGS economies (6 per cent). In terms of plant and machinery, investment prospects are weak across mature economies, with the EU (31 per cent), North America, G7 (both 30 per cent) and PIGS (Portugal, Ireland, Greece and Spain) all below the global average.
Expectations for investment in R&D are a full 27 percentage points lower in the G7 (15 per cent) – dragged down by the North America result (13 per cent) – compared with BRIC (42 per cent).
The report showed that whilst these results offer further evidence of a rapid redistribution of economic power, past investment in infrastructure remains a huge advantage for businesses in mature markets.
Indeed, 26 per cent and 21 per cent of businesses in the BRIC economies (Brazil, Russia, India and China) cite transport and ICT (Information and communications technology) infrastructure respectively as a constraint on expansion, more than double the rates in the G7.
Businesses throughout the BRIC economies show dissatisfaction with local infrastructure. Businesses in India are particularly concerned; more than a third cite both transport and ICT infrastructure (both 36 per cent) as an impediment to growing their business.
The situation in mainland China is slightly better but 25 per cent of businesses believe transport infrastructure is holding them back, and 22 per cent cite ICT infrastructure. Businesses in Brazil and Russia are slightly less dissatisfied with their ICT (16 per cent) but more than one in five cite local transport infrastructure as a growth constraint.
Elsewhere, businesses in Turkey (49 per cent) and Thailand (40 per cent) cite local transport infrastructure as a constraint on their ability to grow whilst those in Vietnam (39 per cent) and Thailand again (28 per cent) cite ICT infrastructure.
The report showed the widening difference of growth in mature and emerging markets.
Businesses in the Latin American economies of Argentina, Brazil, Chile and Mexico look wellplaced for growth moving in to 2012 with both strong order books, and higher revenue expectations.
Other emerging economies such as India, South Africa and the Philippines also look set for a strong 12 months, as well as those European countries which, at least initially, recovered quicker from the downturn: Germany and Sweden.
By contrast, businesses in the PIGS economies expect another tough year in 2012.
They are joined by three other European countries – France, Switzerland and Poland – and Japan in a group of countries where prospects for business growth look weakest.
Businesses in some of the large, rapidly expanding emerging economies such as China, Russia and Turkey which could pose an issue for longer term global economic growth.
Meanwhile, four members of the G7 – Canada, Italy, the United Kingdom and the United States –seem to be suffering from increased competition, with stronger order books failing to result in higher revenue prospects.
