Every quarter, we publish the Vistage CEO Confidence Index. It’s a barometer of SME CEOs’ sentiments regarding the overall economy, their own business and their future plans, offering business leaders an insight into the mindsets of their peers.
Our results from Q1 2022 are now ready to share - and it’s a very different picture from last quarter. While COVID-19 is no longer causing quite as many problems, CEOs are finding themselves faced with a new set of challenges to overcome.
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The economy: good and bad
The good news is that the proportion of CEOs who believe the economy has improved has increased since a year ago. 38% believe there has been improvement in the last 12 months, compared with 31% this time last year.
However, predictions for the next 12 months aren’t so positive. 54% state that they expect the overall economic conditions of the UK and Ireland to be worse during the next 12 months. In Q1 2021, just 7% believed that things would be worse.
This concern comes from a variety of sources. Of course, the situation in Ukraine is having an impact. 52% expect that Russia’s invasion of the country will have a direct impact on businesses.
The CBI has predicted that Russia’s actions will push UK inflation even higher, while sanctions could well impact on a number of businesses too.
As a result of the overall economic situation, 84% believe that the cost for services will increase dramatically, further playing into CEOs’ economic fears.
Sales and profitability: a cautious outlook
In Q1 2022, 64% of CEOs stated that they expected sales revenues to increase over the next 12 months. 25%, meanwhile, expected the figure to be roughly the same in 12 months’ time.
It’s a less rosy picture than this time last year. In Q1 2021, 84% believed sales revenues would increase, with just 12% expecting them to stay the same.
The outlook is similar when considering profitability. Comparing Q1 2022 and Q1 2021 shows that expectations around profitability have declined. Just 39% (previously 66%) expect profitability to increase over the coming year. 34% (26% last year) believe it will stay the same, while 25% (vs. 8%) predict it will become worse.
Compared with this time last year, it’s a significant difference: but it’s easy to see why. With COVID-19 restrictions starting to ease when we ran our Q1 survey in 2021, CEOs were more optimistic. Now, however, increasing costs and supply chain issues are threatening both sales and profitability.
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44% of SMEs expect fixed costs to rise over the coming year, with 85% anticipating having to increase their product/service costs as a result. The main reasons our respondents gave for this were:
- Increased wages and compensation (79%)
- Increased energy prices (74%)
- Increased prices from vendors (69%)
- Higher costs for raw materials (58%)
Furthermore, 37% of SME CEOs state that their supply chain issues are actively getting worse. 52% expect - and are already experiencing - severe disruption as a result of Russia’s invasion of Ukraine.
A continued fight for talent
This time last year, 70% of SME CEOs said they expected their total employee numbers to increase over the coming 12 months. In the most recent data, that figure has dropped to 64%.
The war for talent continues to rage on. 69% of those surveyed most recently have experienced talent and hiring issues that have impacted their ability to operate at full capacity.
While there’s no magic solution, SMEs are investing in a variety of areas to try and resolve the issue:
- Training and developing the existing workforce (69%)
- Boosting wages (66%)
- Increasing employee benefits (52%)
- Reorganising the existing workforce (37%)
- Refining recruitment strategies (48%)
- Allowing employees to work remotely (47%)
- Investing in automation and labour-saving devices (35%)
- Increasing overtime for existing employees (18%)
- Slowing or delaying growth (17%)
- Offering hiring bonuses (15%)
- Creating apprenticeship or internship programmes (13%)
As Geoff Lawrence, Managing Director of Vistage UK and Ireland, says, “As confidence in the economy has dipped, business leaders need to remain as agile as ever to help navigate today’s tricky circumstances.” There’s no denying that the next 12 months will continue to bring challenges. However, if the last two years have shown anything, it’s that the CEOs who have the desire to keep climbing can come out the other side even stronger than before.
The good news is, you don’t have to climb alone. With Vistage membership, you can benefit from the wisdom and support of your peers, your mentor and others - find out more here.
Image By Photocreo Bednarek via Adobestock
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