Business bosses worldwide predict optimism & confidence

• Positive outlook tempered by significant impact of terrorism
• US bucks trend as it passes peak in economic cycle

The first results from the 2005 Grant Thornton International Business Owners Survey (IBOS) conducted in 24 countries around the world and published today (6 December 2004), show that business owners of mid-sized companies worldwide are much moreoptimistic about the economy than a year ago.

Companies in 13 out of the 24 economies surveyed are much more optimistic than last year, with an increase of more than 10% in their optimism/pessimism balance (*see note below). Only three countries significantly buck this trend - the US, Russia and Spain - with more than a 10% drop in their optimism/pessimism balance. Expectations for investment (in new buildings and plant & machinery), a critical indicator of medium-term strength, are at the highest level in the history of the global survey and at the highest level in the EU since 2001.

Despite the overall optimistic results, however, the impact of terrorism had affected business owners' views. Nearly a third (29%) of business owners in the whole survey said that terrorism had made them more pessimistic about their economy. This was most notable in Mexico (53%), Spain (49%), Taiwan (42%), Poland (37%), Turkey (36%), Italy (35%), Japan (35%), Germany (34%), the Netherlands (31%), the US (31%) and Russia (29%).

Said Andrew Godfrey, Head of International and European Services, Grant Thornton: "Terrorism has obviously had a strong impact on business opinion all over the world. But despite that, the business world is a much more optimistic place than a year ago.

"The US, the world's largest economy, may have passed the peak in its current economic cycle however, and optimism there, although high, has dropped from +78% to +62%. It seems to be a case of the US becoming less buoyant just as the rest of the world becomes more positive.

"The results are particularly welcome at a time when overall economic performance appears to have stalled. All round the world, consumer-led spending has kept economies afloat for the last few years. As that has faded, business confidence looks as though it is taking over, boosting investment which is important for the medium-term outlook."

The most optimistic business owners of all, for the second year, are in India with an optimism/pessimism balance of +88%. Raw material-producing economies such as Australia, Canada and South Africa also remain very optimistic. The greatest surge of optimism compared with last year is in Ireland (up by 72 points to +79%), Poland (up by 53 points to +21%) and two post-SARS Asian economies, Singapore (up by 92 points to +62%) and the Philippines (up by 51 points to +50%).

Vishesh Chandiok, International Practice Partner, Grant Thornton, India comments: "The pace of fiscal, economic and industrial reforms has not only continued under the new government but appears to have gathered speed. India Inc is emerging bigger, faster and stronger. With an economist at the helm of the Government, far-reaching economic reforms and the enterprise of Indian entrepreneurs, I believe India will continue to shine for some time to come."

Business owners in Japan (-27%) are the most pessimistic about their country's economy although they are much less pessimistic than last year (-46%) when they were also at the foot of the league table. Japan is now the only country with a negative balance in the survey. After Japan, the least optimistic countries are Italy (+7%), Spain (+9%), Taiwan (+14%) and Russia (+14%).

Ends

Notes to editors

The Grant Thornton International Business Owners Survey (IBOS) was carried out among over 6,300 owners of medium sized businesses from 24 countries during Autumn 2004. IBOS began in 2002 and builds on the European Business Survey (EBS) which Grant Thornton ran from 1993 to 2001. The research was conducted by Experian Business Strategies Limited and Wirthlin Worldwide.

* The figure is the percentage balance of the respondents who are optimistic and those who are pessimistic.

DETAILED RESULTS OF BUSINESS OWNERS' EXPECTATIONS FOR THEIR OWN COMPANIES:

• There is increased confidence among businesses around the world particularly signalled by an expectation of investment-led growth. The optimism balance for investing in new buildings is +27%, up eight points from last year with India (+50%), Turkey (+36%), Ireland (+34%) and South Africa (+34%) topping the list. The global average of expectations for investing in plant and machinery is also up, to +40% from +35% last year. This category is led by European countries: Poland (+60%), Turkey (+58%) and Ireland (+58%).
• Prospects for employment have improved for the second year running with the optimism/pessimism balance for jobs being +34% compared to +25% last year. Business owners in India are most optimistic about employment with a balance of +59%, followed by the Philippines (+57%), the US (+55%) and Turkey (+55%). The picture is most gloomy in Europe which has the six most pessimistic countries: Germany (-7%), France (+5%), Poland (+6%), Sweden (+8%), Spain and Italy (+9%).
• There is a wide expectation that profitability will rise. The global average has increased from +42% last year to +45%. India is by far the most optimistic in terms of profitability (+75%). It is followed by New Zealand (+62%) and the Philippines (+62%). Taiwan bucks this trend with an overall negative balance (-11%).
• The most optimistic country in Europe is Ireland with a balance of +79%, followed by Sweden (+52%), Turkey (+49%) and the UK (+46%). The greatest surge of optimism can be seen in Ireland (up by 72 points to +79%) and Poland (up by 53 points to +21%). Major European economies, Germany and France, are also more optimistic this year with Germany moving from a balance of -6% to +17% and France moving from +4% to +19%.
• The least optimistic countries in Europe are Italy (+7%) and Spain (+9%). The biggest falls in optimism are in Spain (down by 40 points to +9%) and Russia (down by 17 points to +14%).
• EU business owners are the most buoyant since IBOS began in 2003.