Private-Company Leaders' Bright Economic Outlook Spurs Stronger Capital Investment, Latest PwC Survey Finds

NEW YORK, Aug. 5, 2014 /PRNewswire/ --

  • Nearly three in five private companies are confident about the U.S. economy, continuing their 18-month optimism streak.
  • More than one-third of them plan major new capital investments, the highest percentage in over two years.
  • The majority of private companies also plan to increase headcount, but minimally, via targeted hiring.

Fifty-nine percent of private-company leaders are optimistic about U.S. economic prospects for the next 12 months, according to PwC US's latest Trendsetter Barometer.® Indeed, the majority of these executives have felt upbeat about the domestic economy for a full year and a half. This confidence is translating into plans for major capital spending projects by more than one-third (36 percent) of Trendsetter companies, the highest number in over two years. The majority (56 percent) of survey respondents also plan to hire in the next 12 months, though in moderation.

Private companies that sell abroad are feeling positive as well. An overwhelming majority (92 percent) believe that the world economy is either growing or staying the same. Only 8 percent of these companies – the lowest percentage in years – describe the global economy as slowing.

"Private businesses see resilience in the economic recovery, both at home and globally," says Rich Stovsky, U.S. leader of PwC's Private Company Services practice. "This confidence is evident in the survey respondents' strong revenue growth projections, which they put at over 8 percent for the next 12 months, with more than one-third of them expecting double-digit growth during that period."

Capital Spending Is Climbing

Private-company leaders say they plan to invest an average of 8.4 percent of their sales in capital projects over the next twelve months, signaling a real bet on long-term growth. Just once in the past several years have we seen so high a level of spending commitment (10 percent in 3Q13). "During the economic downturn, we saw opportunistic companies invest strategically in capital projects to gain a competitive edge and spur faster growth," says Ken Esch, a partner in PwC's Private Company Services practice. "Now that the economy has stabilized, many of their peers are playing catch-up, investing in deferred maintenance, infrastructure upgrades, and emerging technologies to enhance their own growth."  

In asking a subset of private-company leaders about their technology investments, the survey found the following:

  • Seventy-five percent of Trendsetter companies believe technological advances will deliver a moderate-to-major impact on their operations over the next several years, with 44 percent of respondents expecting a major impact.  
  • Seventy percent of companies plan to invest in technology that will automate operations and increase productivity.
  • Sixty percent plan to strengthen their cybersecurity.
  • Fifty-seven percent say they'll devote their IT dollars to data management and analytics.
  • Forty-two percent expect to focus their tech spending on researching and engaging customers.

Meanwhile, the number or private companies voicing concern about headwinds continues to decline for the most part. Lack of demand still looms largest among private companies' anticipated barriers to growth (cited by 59 percent of companies), but less so than a year ago, dropping six points. The biggest declines were in the number of companies registering concern about legislative/regulatory pressures (42 percent of companies voiced this, down 13 points from a year ago) and increased taxation (22 percent of companies, down 15 points).

Private Companies Seek Talent through New Business Initiatives

Finding qualified workers continues to challenge private companies, with nearly one-third (32 percent) of the survey respondents citing this as a barrier to growth. And so although a healthy 56 percent of Trendsetter private companies say they'll add employees in the coming year, they intend to do so conservatively, planning to increase their headcount by just 1.8 percent as they continue to search for the right people with the right skills – at the right place and cost

The search for skilled workers is affecting more than just private companies' HR policies. It's influencing a variety of business initiatives, too. For instance, when geographically expanding Trendsetter businesses were asked why they're heading into new U.S. markets, they said that tapping a better skills base was their top reason. They reported much the same when asked why they're pursuing M&A, joint ventures, and strategic alliances – 54 percent said their chief objective was to access skilled employees.

"The survey results remind us that workforce planning needs to be tied closely to a company's business objectives," says Esch. "The overall number of anticipated hires may be small, but if the vacancies are for critical roles? An inability to fill those could quickly turn into a growth obstacle for businesses."

Additional Survey Findings

  • Two-thirds of Trendsetter companies also plan to increase operating expenditures across a range of areas, including new products and geographic expansion.
  • The rate of major capital expenditures is sharply higher for companies selling abroad than their domestic-only peers – 46 percent versus 27 percent.
  • International companies also project higher revenue growth than their peers – 9 percent versus 7.3 percent.

About PwC's Private Company Trendsetter Barometer

Each quarter, PwC's Trendsetter Barometer® tracks the business issues and best practices of America's leading privately held businesses. This quarter's report incorporates the views of 205 C-suite officers (CEOs/CFOs): 118 from companies in the product sector and 87 in the service sector, averaging $355 million in revenue/sales, and including large, $500M-plus private companies.

About PwC's Private Company Services Practice

Located in all major US markets, PwC's Private Company Services (PCS) is a national practice comprised of more than 170 partners who provide customized tax, audit and advisory services to private companies, their owners and high net worth individuals. More than 60 percent of America's largest private companies are PCS clients* They span a broad scope of sectors and industries ranging from manufacturing to retail to industrial to professional services.

A hallmark of PCS is a robust thought leadership program that provides clients with timely, thought-provoking information to help manage and grow their businesses and wealth.

Visit us online at pwc.com/us/pcs.

* Forbes 2013 List of America's Largest Private Companies

About PwC US

PwC US helps organizations and individuals create the value they're looking for. We're a member of the PwC network of firms in 157 countries with more than 184,000 people. We're committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com/US. Gain customized access to our insights by downloading our thought leadership app: PwC's 365™ Advancing business thinking every day

Learn more about PwC by following us online: @PwC_LLP, YouTube, LinkedIn, Facebook and Google +.

© 2014 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC US refers to the US member firm, and PwC may refer to either the PwC network of firms or the US member firm. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

 

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SOURCE PwC US



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