Pain before gain, reveals international survey

Date issued: 27 April 2009

The majority of business leaders believe the current economic downturn will be over by the end of 2010, according to one of the largest, most recent surveys of international business sentiment by CPA Australia.

However, the survey also reveals extensive cuts in staff numbers, bonuses, research and development expenditure, production and capital expenditure are likely to precede any upturn.

The survey also shows businesses are experiencing considerable difficulty accessing finance due to restricted access to credit, particularly in Asia.

Conducted by CPA Australia in March this year, the survey canvassed the opinions of nearly 300 business leaders around the world, predominantly in Australia and south-east Asia.

CPA Australia president Richard Petty said the results confirmed what many in the business and finance sector have cited as a major problem in the wake of the global financial crisis: access to finance, or more specifically lack thereof, is one of the biggest hurdles facing businesses as they battle their way through the global financial crisis.

'This is one of the most pressing issues and one that needs to be addressed as soon as possible before the lack of liquidity strangles business,' Professor Petty said.

Also of interest was the result that large companies are more likely to consider possible staff reductions (57 per cent) rather than cuts to executive remuneration and bonuses (47 per cent).

'This is a reflection that talented leadership has never been in greater demand than now,' Professor Petty said.

'Executives who can demonstrate strategic leadership — particularly given that we are playing in the global marketplace — are highly valued and I would think globally, companies with the budget and an eye on the future are looking to keep or secure the best and brightest talent.

'Why would you let your talent walk out the door if you can keep them through incentives. You don't cut your talent for the sake of short term savings if it's going to cost you further down the track.'

Key findings

Large organisations

• 43 per cent have had difficulty accessing finance due to the current tighter lending conditions
• areas of possible cost cutting are capital expenditure (67 per cent), staffing levels (57 per cent), bonuses (47 per cent) and production (34 per cent)

Small organisations

• 70 per cent have experienced difficulty accessing finance due to tighter lending conditions
• generally consistent approach to cost cutting: around 45 per cent with capital expenditure, staff numbers, bonuses and incentives, and production