Faith in the strength of the economic recovery is at its strongest than at any time over the last five years, according to the Association of Chartered Certified Accountants and Institute of Management Accountants Global Economic Conditions Survey (GECS).
The GECS quarterly survey, the largest regular economic survey of accountants in the world, gauging the views of ACCA and IMA finance professionals globally, revealed that in the last quarter of 2013 55% believed conditions were improving or about to do so, up from 53% in the third quarter of 2013.
However, when it came to the prospects of their own organisations, finance professionals’ confidence fell marginally with 35% reporting a loss of business confidence, up from 32% in Q3.
The modest loss of confidence contrasts sharply with improving fundamentals on the ground. The results for Q4 2013 still represent the strongest year-on-year confidence gains since mid-2010.
"At the global level, the last quarter of 2013 may not have seen a surge in business confidence, but the quality of confidence was improved somewhat, by becoming more closely aligned to actual business opportunities and less reliant on a consistent supply of growth capital," says Emmanouil Schizas, ACCA’s Senior Economic Analyst.
The strongest confidence gains in Q4 2013 came from Ireland, where business confidence soared following the end of the country’s bailout and fiscal adjustment programme, as well as a strong return to the capital markets.
"It is likely that 2014 will be the last year of the recovery and should see a return to normal economic life, whatever that looks like. Recovery in developed markets is still disproportionately dependent on easy money and a surge in the supply of finance in some markets risks creating new credit bubbles.
"Emerging markets, on the other hand, are being buffeted by the outward flows of funds triggered by the Federal Reserve’s intention to taper its asset purchase programme, and business confidence is once again strongly linked to price and exchange rate stability – suggesting a real threat to regional, if not global, financial stability. What finance professionals tell us through GECS this year will be vital in ascertaining the direction businesses are taking."
From a sector perspective, the last quarter of 2013 saw renewed confidence among smaller organisations.
Respondents in small and medium sized businesses (SMEs) and small practices reported the greatest confidence gains, followed by their colleagues in mid-tier accountancy firms. Confidence fell among large corporates and financials, and even more so among respondents in the non-profit and public sectors.
The SME sector’s confidence gains were driven by a relatively small and dynamic group of mid-market firms, which are larger and more internationalised than other SMEs, accounting for most of the confidence gains in late 2013.
Raef Lawson, Ph.D., CMA, CPA, IMA vice president of research, said: “This small group appears to have driven much of the SME sector’s recovery over the last three years. It is possible that such businesses have a distinct advantage in the current environment due to their flexibility and international reach.
"For years, business investment has remained subdued despite the best efforts of governments and central banks, forever on hold until a more promising future. This began to thaw in 2013 and the latest quarter of the year saw a decisive shift. Entrepreneurs and managers are looking around to find that there isn’t likely to be a better time to invest in the future; interest rates are low, opportunities are proliferating, even finance is not as hard to come by as it used to be. If the years of pent-up investment put off by businesses were to be prioritised now, the recovery could very well turn out to be sustainable."