26th Annual CEO Survey – Central and Eastern Europe

26th Annual CEO Survey – Central and Eastern Europe

The war in Ukraine has put the global spotlight on Central and Eastern Europe. From Germany’s eastern border to the frontier of China, CEOs throughout the region are dealing with the fallout from the conflict, which is also driving uncertainty around the world. CEE executives must seize this opportunity to transform their organisations, meeting challenges including geopolitical threats, rampant inflation and economic instability.

Like their peers elsewhere, CEOs in this region are pessimistic about the prospects for the global economy, PwC’s 26th Annual CEO Survey finds. Similarly, they’re bearish on the outlook for their own national economies. The good news? Executives are more optimistic about their companies’ own prospects. They see the need for change – and they’re also thinking about the steps they need to get there.

This is an optimistic sign that executives are finding ways to leverage the current crisis for their companies’ long-term benefit. As leaders seek to transform their organisations, we believe the data in this survey can be a powerful tool for them, highlighting priority areas for change and helping them chart a course of action.

CEOs in our region are more confident in their own company’s growth

Despite their gloom about macro conditions, CEOs are quite confident when it comes to things they can directly control: they are more bullish than the global average on their own company’s revenue growth prospects over the next 12 months, with 46% saying they’re “extremely confident” versus 42% globally. Their optimism is even greater when looking at a three-year horizon, with 50% in CEE and 53% globally saying they’re confident in their company's growth.

Question: How confident are you about your company’s prospects for revenue growth over the next 12 months?

Question: How confident are you about your company’s prospects for revenue growth over the next 3 years?

When it comes to seeking expansion opportunities abroad, not surprisingly CEE leaders are looking closer to home than before. The shock of the pandemic and the ongoing geopolitical turmoil mean companies around the world are seeking ways to nearshore their business relationships, shortening and strengthening supply chains, and companies in our region are no different.

In this year’s survey, Germany remains the top focus for growth for CEE CEOs. Within the region, business leaders indicated an increased focus on Ukraine (8%), Serbia (6%), Hungary (5%), the Czech Republic (5%), Albania (5%) and Bosnia and Herzegovina (4%) – again reflecting the nearshoring trend. 

The geographical priorities of executives in our region also reflect the continued effect of Brexit on companies in EU member states. Italy and France are now in a tie for fourth place, identified as a priority by 9% of executives, and the UK has slipped to seventh place, with 7%.

Taking action: In CEE, CEOs are raising prices and cutting costs—but most don’t plan to reduce workforce

In response to near-term economic challenges, CEOs in the region are in line with global peers in taking actions to spur revenue growth and cut costs. One action stands out: 58% of CEOs in our region say they’ve already begun implementing price increases – a tool that so far just 51% of their global peers have reached for. This is understandable when we look at the region’s rates of price growth compared to Western Europe. According to the Eurostat data published in December 2022, the lowest annual rates were registered in Spain (6.7%), France (7.1%) and Malta (7.2%). And the highest rates were recorded in Hungary (23.1%), Latvia (21.7%), Estonia and Lithuania (both 21.4%). More executives in CEE feel they simply have to begin to pass on their increased costs to their customers.

Both in CEE and globally, the shock of the Great Resignation and the ongoing need to attract and retain talent are shaping the response to macroeconomic challenges. Although 51% of leaders say they have already begun cutting operational costs and 21% have slowed investments, just 18% are implementing hiring freezes, only 12% are reducing the size of their workforce and 9% are reducing compensation.

Question: What actions, if any, is your company considering to mitigate against potential economic challenges and volatility in the next 12 months?

CEE’s continuing war for talent: Labour and skills shortages seen as top long-term challenge to profitability

Chief among threats to their businesses, for leaders in our region, are potential shortages of labour and skills – part of the ongoing global war for talent that has been evident in CEO surveys for several years now. When asked about the forces most likely to impact their industry’s profitability over the next 10 years, as many as 64% of regional CEOs cited skills shortages as impacting them “to a large/very large extent”, well above the 52% global rate.

Other threats include changing customer preferences (CEE: 52%, global: 56%), and technology disruption, e.g. advanced tech, AI, the metaverse, blockchain (CEE: 47%, global: 49%).

Question: To what extent do you believe the following will impact (i.e., either increase or decrease) profitability in your industry over the next ten years? 

To respond effectively to these challenges, CEOs are building resilience today. Technology- and reinvention-oriented investments loom large for many global and CEE CEOs. In our region, business leaders are planning to invest more in automation, deploy technologies (cloud, AI, etc.), and upskill their workforce in the next 12 months.

Question: Which of the following investments, if any, is your company making in the next 12 months?

Managing climate risks is a growing priority for businesses – both globally and in CEE

CEOs both in our region and globally expect some degree of impact from climate change in the next 12 months—primarily in their cost profiles, where 46% expect a moderate, large, or very large impact, followed by supply chains (43%). Fewer are worried about climate-related damage to their physical assets (17%). 

Moving at the right pace and with the right priorities to mitigate climate risks, generate opportunities and decarbonise is an enormous strategic challenge. Many companies appear to be strategising today without the information provided by an internal pricing mechanism for carbon, even though this could help them account for considerations such as taxes and incentives, and clarify strategic tradeoffs. The question then is whether leaders in our region are correct in moving more slowly than their global peers to address climate challenges.

Question: Below is a list of actions companies may undertake to prepare for the risk of climate change. Which statement best characterises your company’s level of progress on these actions?

CEOs want to spend less time on operations, more time reinventing their business

We asked CEOs how they divide their time among a range of priorities, including driving current operating performance; adapting the business for the future; spending time with customers; engaging with employees; and interacting with investors, the board, and other external stakeholders. Driving current operating performance consumed the biggest share of CEOs’ time. If they could redesign their schedules, they told us, they would spend more time evolving the business and its strategy to meet future demands.

The results indicate how the challenges of today’s business environment demand that CEOs keep their hands firmly on the wheel, giving them less time for less immediate considerations. This highlights how business transformation is important not only for companies to survive after the next 10 years, but also for reimagining the role of the CEO: creating organisations whose top leaders are freed up from day-to-day challenges.

Question: During your work time, on average, what percentage of time do you spend on each of the following?

Question: Knowing what you know now, if you could start over with a blank calendar, how would you allocate your time as CEO?

Looking ahead: Redefining the leadership agenda for CEE

This is our 26th year of engaging business leaders around the world on their confidence level, their main priorities and the actions they are taking for the year ahead. Never has this exercise been more crucial to the future of our region. We believe that the leadership agenda of CEOs will go a long way towards mapping a path for the region overall.

Decades-high inflation, supply chain disruption, and geopolitical conflict have contributed to a level of CEO pessimism not seen in over a decade. But there is an opportunity in every crisis. And the need to take decisive action by the leaders and to reinvent their businesses for the future has never been as strong – 45% in our region don’t think their companies will be economically viable a decade from now if they continue on their current path. 

The data we presented show that CEOs are balancing how to maintain focus on both long-term and short-term challenges.

They might be now focused more on current concerns: inflation, geopolitical turmoil and the economic downturn. But looking after employees and upskilling them is an even more pressing need than ever before. Labour and skills shortages are seen as top long-term challenges to profitability in the CEE region. 

CEOs here and around the world also noted the need to collaborate with a wide range of stakeholders to build trust and deliver sustained outcomes if they are to generate long-term societal value.  

The decisions that CEOs make in these moments will shape the development of their organisations, and of the region’s economies and society as a whole for the next decade or more. We are hopeful that our research will help leaders identify vulnerabilities and focus on their biggest opportunities, leading to broad, long-lasting positive change. We look forward to continuing to engage with our clients and stakeholders in the months ahead on this important discussion about the future of our region.