Irish CEOs bullish but fear post-Covid tax policy

PwC CEO survey reveals bullish Irish CEOs expect to grow revenues this year but are wary about tax policy changes when the bill for Covid-19 ultimately falls due.

Irish CEOs are more optimistic about the outlook for their businesses and 82pc feel confident about revenue growth in the year ahead, only slightly behind the international level of 85pc.

According to the latest Irish and Global CEO Survey by PwC confidence is bouncing back with 49pc of Irish CEO respondents feeling favourable about the outlook for Ireland’s economy in the year ahead, up from an almost record low of 16pc last year.

“A year on since Covid-19 hit, it is encouraging to see that business leaders responsible for making investments and hiring staff are feeling cautiously optimistic about the year ahead”

Global CEOs are much more upbeat: 76pc are confident about global economic growth (2020: 22pc) and this is a record high since we first started asking the question.

In terms of revenue growth, the survey highlights that organic growth and operational efficiencies will be the two main drivers of this planned growth. In terms of key growth markets, the UK and the US remain the most important overseas markets for Irish businesses.

Fears around post-Covid tax obligations

To achieve and sustain organic growth requires an engaged and able workforce for a post Covid-19 environment. As such 58pc expect to increase their workforce in the year ahead (global: 44pc), up from 39pc last year. 

This is at a time when, for eight years running, Irish business leaders are more concerned about skills shortages (75pc) than their global counterparts.   

Similar to global counterparts, the disruption and uncertainty caused by the pandemic (95pc) is the top concern for an overwhelming majority of respondents.  On the need for fiscal discipline, nearly two-thirds (63pc) of Irish CEOs stated that tax policy changes to address consequent rising Government debt levels will increase their organisation’s total tax obligation.

“A year on since Covid-19 hit, it is encouraging to see that business leaders responsible for making investments and hiring staff are feeling cautiously optimistic about the year ahead. CEOs have been forced to navigate extraordinary circumstances,” said Feargal O’Rourke, managing partner at PwC Ireland.

“At the same time, given Ireland is very dependent on global trade, and with the complexities we are now seeing in certain areas following the Brexit Trade Agreement, it is not surprising that Irish CEOs are not as confident about the future as their global counterparts.  With vaccines on the way, it still remains uncertain what the recovery will look like. But it is clear that we cannot go back simply to the way things were before. 

“Having endured one of the most turbulent times in history, Irish CEOs are focused on growth and operational resilience.

“They realise that this growth won’t happen without having the right people with the right skills.  A key consideration will also be how to continue adapting their businesses and deliver sustained outcomes in this rapidly changing external environment. Organisations that get this right will be best placed to come out of the pandemic as strong, resilient and productive businesses, able to withstand future shocks.”

Climate change and digital transformation top agenda

Other concerns of Irish CEOs include: cyber threats, climate change and environmental damage, the speed of technological change, supply chain disruption and readiness to respond to a crisis. Over-regulation and uncertain economic growth also remain very high.

While Covid-19 has brought about a significant increase in digital adoption, it has also increased the risks associated with digital. As the second greatest concern, nine out of ten (90pc) Irish business leaders are worried about cyber threats, having shot up from 78pc last year.  Concerns around misinformation in Ireland have doubled (2021: 71pc; 2020: 36pc).   

However, more action is needed: just 27pc plan double digit investment in cybersecurity and data privacy in the next three years and lag global counterparts (31pc). 

The increase in CEOs’ concern about cyber threats and misinformation coincides with many businesses having pivoted to online and remote working.  The survey suggests this digital transformation will accelerate, but its intensity could be stepped up even more. Four out of ten (41pc) Irish CEOs plan double digit investment in digital transformation, including automation in  the workforce, promising productivity and other business benefits, but they lag global peers (49pc).  

Another top concern, climate change and environmental damage (78pc), is at a record high, up from 56pc in 2019. At the same time, 68pc are not factoring climate change into their strategic risk management. Just one fifth (20pc) plan double digit investment in sustainability and ESG initiatives over the next three years, with over a quarter (28pc) planning no investment at all.  

“Despite the optimism, the survey highlights the considerable anxiety about many of the threats to their businesses,” said Ciarán Kelly, Advisory Leader, PwC Ireland. “Yet there is still more to do to tackle some of the challenges head-on. Even more significant investment is needed in key areas such as risk management, cybersecurity and digital to keep pace with global peers.

“More commitment is needed to fully embed climate change, one of the biggest challenges of our generation, into the business strategy.  Around half believe their organisation needs to do more to ‘measure’ and ‘report’ their environmental impact. More and better corporate information on environmental impact is key to driving the change needed to get to a net zero economy.

“To achieve the kind of change that’s needed, CEOs will need to think differently and constantly evaluate their decisions and actions against broader societal impacts. In so doing, they’ll set the course that builds trust and delivers sustained outcomes for shareholders, society and our environment.”

By John Kennedy (john.kennedy3@boi.com)

Published: 11 March 2021