Companies have ‘gut feeling’ business to improve: PwC

Most SME’s expecting growth of 4% or more.

September 12, 2012   by CANADIAN PRESS

OTTAWA — Canadian privately-owned firms are surprisingly optimistic about the next year, some saying they have a “gut feeling” things are about to improve, a new survey of business confidence suggests.

The annual survey from the PwC accounting and consulting firm shows that more than three- quarters of privately-held businesses – most family-owned firms and not publicly-traded _ believe their business will improve over the next year.

And two-thirds believe they will grow by as much as four per cent or more, about twice the expected rate of growth in the economy.

The results are surprising given that most economic news has grown more bleak in the past few months, with both Canadian and global growth coming in below expectations during the first half of 2012, and the European debt crisis dominating headlines.

Statistics Canada reported that Canada’s trade deficit reached a new high at $2.3 billion in July as exports to the US, the country’s chief market, tumbled 5.5%.
The survey was conducted during the summer months and included over 400 business leaders from a broad range of industries.

It’s not that the heads of privately-held firms, which represent more than half the total in Canada, are not worried about the economy, says Tahir Ayub, PwC’s head of private company services. Business owners named the economy their top of mind concern for the first time since 2009.

But Ayub said the recession has taught business leaders to become more personally attuned to their clients and markets.

“So they are basing this on their gut feeling and experience based on what they know about their market and the industries they operate in … and their experience,” he said.

The top reasons owners gave for thinking their business will get better were improved sales (66%), more market share (50%), and strong company forecasts (49%). Over a quarter of respondents also said they just had a “gut feeling” conditions will improve.

Interestingly, smaller companies with 100 employees or less were the most optimistic, while bigger firms with over 500 employees were the least likely to be optimistic.

As well, newer companies with less than 20 years in operation tended to be more upbeat than older companies.

Ayub said the longer a company has been in operation, the more likely it reported being focused on reducing costs, while about a third cited difficulties finding new customers.

Firms also reported a rising concern with finding skilled workers despite the relatively high 7.3% unemployment rate. Other recent business samplings, including the quarterly survey conducted by the Bank of Canada, have also reported frustration with labour shortages.

“I think it’s partly a skills mismatch and it’s partly a problem of not enough labour mobility in Canada,” said Ayub.

“If you’ve got unemployment running at eight per cent in Ontario and Quebec and probably double digits in the Maritime provinces, and you’ve got unemployment closer to 4.5% in Alberta, this is an issue.”

Ottawa unveiled changes to the employment insurance program this spring compelling unemployed workers to go further afield in their job searches and even take employment below their previous salary and skills level, or face losing benefits.

But Ayub said more needs to be done, including positive measures that encourage relocations.

© 2012 The Canadian Press

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