Executive summary of high level findings
Executives across industries and private company leaders are focusing on their own growth, even as they prepare for a possible recession. Business leaders are keeping watch on economic conditions, inflation and a decline in consumer purchasing power. They’re also carefully balancing their workforce needs, focusing on the talent they need to fuel strategic growth.
Consumer markets
81%
of CM leaders are confident in their company’s ability to make progress on environmental issues
Consumer-facing companies take steps to counter economic volatility
Consumer-facing companies anticipate a challenging macroeconomic landscape as they look ahead to 2023. More than 80% of consumer markets (CM) executives agree a recession will occur in the next six months (with 36% strongly agreeing) while 51% are very concerned about macroeconomic conditions, including a potential recession and stock market volatility.
Also very concerning to CM leaders is the decline in consumer purchasing power (49%), broader and more frequent cyberattacks (47%) and Federal Reserve tightening (44%). To counter the effects of a mercurial economy that continues to whipsaw consumer confidence, CM executives plan to cut costs (41%), make acquisitions or divestitures (40%) and hire to drive growth in specific areas (37%).
Given the inherent consumer-facing nature of the industry, it comes as no surprise that 41% of CM leaders tell us they expect employees to work on-site full-time (versus 32% overall). Almost a third (32%) strongly agree that their companies need as many people back on-site as possible to achieve their strategic goals (versus 26% overall). Meanwhile, more than a third (35%) are very concerned about the increase in union activity and 29% expect the trend to continue.
CM executives are either closely monitoring policy or actively engaging with lawmakers to influence policy in areas such as cybersecurity (86%), tax (85%) and labor policy (77%). More than a third of CM leaders (35%) are very concerned about the increased complexity of doing business in China, and 27% plan to move production and distribution out of China over the next 12 to 18 months.
PwC’s 2022 Holiday Outlook Survey indicates that consumers are also worried about inflation and the rising costs of transportation and utilities. Despite those concerns, 74% said they will spend the same or more on holiday shopping, travel, dining out and entertainment this year than they did in 2021.
Financial services
50%
of FS executives plan to hire in specific areas to drive growth despite risk of recession
Possible recession won’t stop financial services’ growth drive
Should financial services companies stop hiring as a recession looms? One industry CEO recently rejected that idea, seeing value in adding workers. That executive is not alone.
In our October Pulse Survey, financial industry executives are generally optimistic about their talent picture, with 31% strongly agreeing that they attract and retain the talent they need (compared to 27% overall). They’re also more likely than those in other industries to say they’re planning to hire in specific areas to drive growth (50% compared to 44% overall). For example, they plan to beef up their compliance departments, with 32% saying they will hire more personnel (versus 27% overall). And they’re less likely to reduce the number of full-time employees (18% versus 26% overall). That’s despite 82% of industry executives agreeing that a recession will occur in the next six months.
The hire-in-a-downturn mindset reflects the financial services industry’s drive to grow the top line and use technology modernization to help fuel that growth. Firms have little choice but to hire if they want to build a modern platform to attract new customers and retain existing ones. To deliver that kind of service, workers with cloud, digital and data analytics skills are needed.
But there’s a potential hitch in those hiring plans considering many job seekers want a fully remote schedule. Financial services firms have increasingly resisted that perk with only 2% of industry executives reporting that employees do not need to be on-site at all.
Health industries
56%
of heath industries executives say they will make changes to strategic planning based on current conditions
Health industries shift strategic plans to weather economy
The current business environment has health executives looking to make changes, according to our latest PwC Pulse Survey. More than half (56%) of health industries (HI) executives say they will make changes to strategic planning over the next 12-to-18 months, compared to 47% of all respondents overall. A worsening economy is a major worry to this group, and 44% of HI executives strongly agree that there will be a recession in the next six months. Moreover, 61% are very concerned about current macroeconomic conditions, and 40% are very concerned about the strength of the US dollar. These concerns are consistent with what other industry executives are worried about.
In some areas, however, HI executives are more concerned. For one, they’re more worried about the complexity of doing business in China (40% agreeing strongly compared to 33% overall). They also worry about broader and more frequent cyber attacks, with 63% saying they’re very concerned compared with 52% overall. This is consistent with findings from our August Pulse Survey, where 43% of health industries leaders cited cyber attacks as a top risk to business. Cyber attacks against a hospital system may result in delayed patient care, loss of privacy or even more severe consequences.
Despite the well-publicized issues on clinician fatigue and shortages brought about by the pandemic, health industries executives feel better than other industries about their talent, with 82% agreeing (versus 76% overall) that they successfully attract and retain the talent they need. Health industries seem to be embracing remote work, with only 14% strongly agreeing they need as many people back on-site as possible to achieve strategic goals. Provider organizations can benefit from specific steps to address the current nursing workforce shortage.
Trust is a cornerstone of the health sector, with 40% of HI executives agreeing strongly that there’s a high level of trust between leaders and employees (compared to 33% of respondents overall). HI executives also prioritize stakeholder trust, with 42% strongly agreeing this is a priority (versus 33% overall). Providers, payers and pharmaceutical and life sciences organizations have historically embraced the social pillar of environmental, social and governance (ESG) efforts.
Industrial products
36%
of IP companies are completely confident in achieving their near-term growth goals
Manufacturers looking to weather choppy economy
Despite economic headwinds, US industrial production has been holding its own, inching up by 0.4% in September on the heels of a 0.1% dip in the previous month. While rising interest rates and inflation persist, 36% of industrial products (IP) companies say they’re completely confident in achieving their near-term growth goals (compared to 33% of all companies surveyed). An additional 42% say they’re mostly confident. IP executives also feel good about their M&A prospects: 41% are completely confident in their ability to make an acquisition (versus 37% of all respondents), while an additional 39% say they’re mostly confident.
Still, concerns about current economic conditions abound. Fifty-four percent of IP leaders report that they’re very concerned about the macroeconomic climate and an additional 36% are moderately concerned. Rising interest rates create another area of risk, with 83% saying they’re either moderately or very concerned about the Federal Reserve’s tightening cycle. Meanwhile, the threat of cyber attacks looms, and 87% of IP companies are concerned about more frequent and/or broader cyber attacks.
Looking to the next 12 to 18 months, manufacturers signal that they’re bracing for a challenging business environment, with a third (32%) of IP executives planning to reduce the number of full-time employees. Over half (51%) anticipate making changes to strategic planning based on current factors such as inflation, consumer confidence and government policy, and 36% plan to shift their products and services mix. Additionally, 28% of manufacturers report that they plan to move business out of China over this period.
Top government policy issues for IP companies include US tax policy, with 47% reporting that they’re monitoring it closely and 36% actively engaging with lawmakers to influence policy. Cybersecurity policy is also a concern, with 26% of IP respondents reporting that they engage with lawmakers on the issue, and an additional 57% saying that they’re monitoring it closely.
Tech, media, telecom
73%
of TMT leaders report they are mostly or completely confident they can achieve near-term growth goals
On target for growth, despite macroeconomic threats
Even while 91% of technology, media and telecommunications (TMT) leaders say they’re either moderately or very concerned about macroeconomic conditions, 73% report they remain mostly or completely confident they can achieve near-term growth goals.
As TMT leaders face strong headwinds, they’re more likely than their peers to report concerns about declines in consumer purchasing power (54% versus 46%) and wage growth failing to keep up with inflation (47% versus 39%). About half (51%) are very concerned about more frequent or broader cyber attacks.
At the same time, 82% of TMT leaders say they’re mostly or completely confident their companies can execute on overall business transformation initiatives, while 81% report high levels of confidence that they can make acquisitions.
With relevant legislation stalled in Congress, antitrust did not rank among the top five policy concerns, with just 43% of leaders saying they’re closely monitoring the issue and 26% reporting that they’re engaged with lawmakers to influence policy. TMT executives report lobbying efforts around privacy, cybersecurity, climate and clean energy, and US and global tax policy.
On the labor front, 29% of TMT leaders say they plan to reduce the number of full-time employees during the next year or 18 months. Meanwhile, hybrid work models are in effect for many TMT companies. Nearly one out of ten (9%) say employees don’t have to be on-site at all, and 56% say employees are typically expected to be on-site one to four days per week.
Private companies
63%
of private companies are confident they can achieve their near-term growth goals
Private companies are confident in their company’s resilience
Macroeconomic conditions — such as inflation, a potential recession and stock market volatility — are the No. 1 concern for both private and public companies in our latest Pulse Survey. Nine out of ten (91%) private company respondents are either moderately or very concerned.
The private sector typically experiences changes in the economic environment earlier than public companies — and the shock of a recession can hit them harder. Private company executives are less confident in their ability to achieve near-term growth goals (63% are either mostly or completely confident) than public company executives (78%). They don’t always have the same access to capital as public companies, and they usually don’t have the same diversification of customers, suppliers and bankers. For example, only 46% of private company executives are confident that their companies can free up working capital (and of that, only 3% are completely confident), compared to 78% of public company executives. This could be especially critical if working capital needs to be reclaimed during a recession so that it’s available during a recovery. We’re seeing increased focus on core business and cash drivers while transitioning fixed costs to variable costs in order to quickly adjust to economic conditions.
The vast majority (86%) of private company executives are concerned about cybersecurity. Cyber attackers may go after private firms because often they don’t have as sophisticated protections in place as many public companies do. Cybersecurity can be expensive and complicated, and difficult for privates to understand what types of protection they need. Given geo-political movements, we can expect attacks to likely continue and increase.
Private company executives are not as concerned about people being in the office or on-site. Only 34% of them are moderately or very concerned about the slower-than-expected return to on-site work (compared to 69% of public companies). Many private companies have smaller offices in non-urban areas and also offer remote opportunities. This can stress recruiting capabilities but the long term gains are showing increased return.
Private companies are also less worried about resignations and “quiet quitting,” as they tend to have smaller workforces with a more collegiate atmosphere. In fact, as many of the larger tech firms are pushing for employees to be on-site, privates stand to gain if they can woo talent from wide-spread locations. Conversely, as remote working proliferates, companies may face evolving cybersecurity challenges.
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