International | Sep 29 2022
New surveys of businesses point to rising expectations for a global recession.
-The likelihood of a global recession, according to Oxford Economics survey
-Sentiment for global growth waning, especially for Europe
-War-related energy market disruption a likely recession trigger
-Personnel cuts already underway
By Mark Woodruff
A quarterly survey of businesses conducted by Oxford Economics showed respondents assign a 47% probability to a global recession over the next 12 months.
The survey sought feedback from 172 businesses in the period September 5 to September 15.
The vast majority of respondents reported becoming more negative on global growth prospects over the last month, and the deterioration in sentiment was even more marked for Europe-centric operations.
The Oxford survey revealed the average expectation for world GDP growth in 2022 now stands at 1.9%, down from 2.1% in July and -1.8 percentage points lower than the level anticipated prior to Russia's invasion of Ukraine.
For 2023, the mean expectation for world GDP growth has fallen to 1.8%, down from 2.2% in July.
To place these 2023 expectations into perspective, the odds of growth at or above 3% have halved from July’s survey, and respondents now only assign a 5% possibility that growth will exceed 4%.
In separate research by IWG, the global leader in hybrid working, 91% of respondents from among 250 UK CFOs believed an economic crisis is inevitable, with more than a third predicting a recession this year.
Personnel cuts are already being implemented, according to IWG, with 44% of CFOs introducing forced redundancies. The survey showed more than a third are reducing new hires, with a similar number delaying new hires.
Businesses contacted in the Oxford Global Risk Survey see a rising risk of stagflation, with a greater than 20% chance for the emergence of a high-inflation regime, and even greater (25%) odds of more severe energy market disruption, including a rationing of natural gas in Europe.
Numerous potential causes of a global recession were cited by respondents. The most common were war-related energy market disruption and rapid monetary policy tightening to curb inflation, at a time when growth remains subdued in China.
Corporate cost cutting
According to IWG, 97% of respondents to its survey are cutting costs by more than -10% per year on increased macroeconomic uncertainty.
Among global Fortune 500 CEO’s, 74% said they plan to reduce office space, while 82% of the 250 CFOs surveyed noted hybrid working is a more affordable business model as overall demand for office space remains high.
IWG also pointed to a recent US survey by workplace software provider Robin, which found 83% of executives expect cost savings from hybrid work and three in five respondents said they plan to reduce office space by -50% or more.
Separately, IWG noted office usage across Australia has risen by 113% since the start of the year as the likes of Australia Post and Commonwealth Bank have asked employees to return to the office for a minimum of a couple of days per week.
IWG currently operates in 77 locations in Australia providing collaborative workspaces, communities and services.
While IWG clearly stands to benefit from its involvement in flexible workspaces, the company points to research by independent consulting firm Work Place Analytics. This shows hybrid working can on average save organisations more than $14,300 per employee.
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