Taking The Pulse Of The Global Economy: Corporate Confidence, Brexit And Taking ESG Seriously

Unlike many other top-down macro-economic surveys, our research starts at the bottom, aggregating thousands of individual company observations until a big picture emerges. 

This year, optimism among company executives has reached a new high. Our global sentiment indicator, an aggregate measure of corporate confidence through the eyes of our analysts, has risen to the highest level in five years. 

It is now well into 'warming' territory, where more analysts are positive than negative about expected conditions for the next 12 months (see chart below). 

Europe: Growing optimism

European companies are back from years of cost control and consolidation.

With the winds of global growth in their sails, they are making the most of ultra-cheap funding costs, growing profitability and sound balance sheets to invest in capital and technology, and to reward shareholders. 

Industry Voice: Why Europe is delivering on its Potential

According to our Europe analysts, company management teams are noticeably more confident about the outlook for their businesses. More than half of analysts (double last year's rate) say management confidence to invest in the business is up on 2017. 

But there are some actual and potential headwinds our analysts are keeping a close eye on. Even more than last year, Europe analysts warn Brexit is already weighing on strategic UK investment decisions.

The vast majority also note that corporate profits would be vulnerable to political uncertainty or instability in Europe.

Brexit headwinds

The UK's long divorce from the European Union has continued to dominate the political agenda (in Britain, at least), but our analysts seem less concerned.

Three quarters of our analysts globally expect Brexit to have no impact on strategic investment plans for the companies they cover over the next two years.

But there is a marked difference depending on where those companies are based.

Brexit blog: UK and EU agree terms on Brexittransition deal

While 95% of our analysts covering Chinese companies say they are unconcerned, for example, 54% of analysts who cover Europe are expecting a moderately negative impact from Brexit, with a further 9% expecting a significant hit.

Particularly affected are consumer discretionary, financials, industrials and materials.

Brexit is also weighing on companies' willingness to invest in the UK, with 6% of all Europe analysts warning that their companies are less willing to invest in the UK as a result of the referendum. 

A third of US analysts and a quarter of Japanese analysts see similar attitudes among their companies.