Wednesday, November 27 2019 12:40

ArmInfo.The 2019 HSBC Navigator survey shows businesses across Europe are bullish about their prospects, with nearly four in five (79%) projecting growth over the coming 12 months, in line with the average globally. This confident outlook is being driven by a number of particularly optimistic markets, including Poland, where 88% of firms project growth in the coming 12 months, along with Spain (85%), Greece (85%) and France (84%).

 

Decision-makers at 9,131 businesses – from small and mid-market to large corporations – across a broad range of industry sectors in 35 markets participated in the survey.

 

Over the past year, 41% of European markets have become more optimistic about the business outlook. In four markets – Greece (65%), UK and Poland (51%) and France (50%) – at least half of all companies are more optimistic than they were a year ago.

 

Around two in five (41%) companies in Europe are expecting their businesses to change totally or substantially in the next five years. The UK (66%), Ireland (51%) and Poland (46%) are the European markets where the highest proportions of businesses predict either substantial or total change. Among goods firms, agriculture, fishing and forestry are the most bullish, with 88% projecting growth in the next year. The automotive industry is the most conservative (74%).

 

The positive outlook across Europe is fueled equally by external and internal drivers. The main internal contributors identified are investment in technology (30%), a motivated workforce (28%), introduction of new products and services (28%) and improvements in productivity (27%). The main external contributors are new markets opening up (37%), transformative technologies in their sectors (25%) and increasing interest in sustainability (24%).

 

Trade outlook

 

Europe is a key trading partner for businesses across the world – and there are clear indications that it will become even more important over the coming three to five years. According to HSBC’s annual Navigator survey, half (50%) of businesses around the world cite Europe as their key trading partner, compared with Asia-Pacific (37%) and North America (29%). The drivers behind this appeal are proven customer demand, favourable partnership opportunities and access to new suppliers and partners in European markets. Within Europe, Germany (15%), France (13%) and the UK (10%) are the top three trading partners for businesses around the world. Looking into the next three to five years, these three markets continue to top the league for global expansion in Europe.

 

Intra-regional trading is also strong. Nearly three-quarters (72%) of European companies regard Europe as one of their top three trading partners, whereas 20% mention North America and 17% mention Asia-Pacific. Over the coming three to five years, businesses around the world indicate a likely increase in the importance of Europe as a trading partner, with nearly two in five (39%) expressing the intention to expand in Europe.

 

In Europe, more than 95% of businesses see trade as a force for good – in line with the global average. Businesses in Europe feel that, in the next five years, international trade will drive innovation (75%), provide new business opportunities (74%) and improve efficiency (72%).

 

Protectionism and geopolitics

 

The survey shows that businesses in Europe increasingly feel that protectionism is growing (55% in 2019 compared with 54% in 2018, and 50% in 2017), albeit to a slightly lesser extent than firms globally. Across the 13 European markets surveyed, protectionism is most strongly felt by businesses in the UK (73%) and Spain (70%), and the least by those in Germany (42%) and Sweden (41%). A considerably greater proportion of domestic companies (59%) are more likely to see gain over loss from protectionism than international operators (46%).

 

Regardless, firms in Europe are focused on offsetting any negative impact of protectionism. The key strategies for coping with protectionism are cutting costs (31%), sourcing from local suppliers (24%), changing the offering in those markets and accepting lower margins (both 22%).

 

The impact of geopolitics is felt more strongly than the impact of protectionism among businesses in Europe, although the proportion is still the lowest across all regions. In the 13 European countries surveyed, the impact of geopolitics is cited by a greater proportion of companies in the UK (78%), Ireland (71%) and Spain (67%) and by the lowest proportions in the Netherlands (51%), Germany and Italy (both 52%)

 

The sustainable future

 

European businesses are keenly invested in driving sustainability. Companies in Europe continue to implement sustainable practices with a range of motivations: to improve operational efficiency, to meet buyer expectations (both 24%), to meet regulatory standards (23%), to grow sales (22%) and to gain a competitive advantage (21%). These key motivations are consistent with the picture globally.

 

Companies in Europe are feeling the pressure to become more sustainable in the next five years from end consumers (35%), governments (32%) and competitors (30%). Over the next five years, they expect to invest more in reducing waste generation through prevention, reduction, recycling and re-use (29%), technology, innovation and infrastructure to improve sustainable production (27%), promoting employee health, wellbeing and safety (26%) and improving energy efficiency and sourcing more clean energy (25%).

 

UK firms are most responsive to the UN's SDGs, with 75% believing they have a role in delivering them and 38% thinking that role is significant, followed by the Netherlands (58% and 17%), Spain (58% and 17%) and France (58% and 16%).

 

Breakthrough tech

 

The Navigator survey shows that European companies are very aware of the impact of transformative technologies. As such, data security technology (24%), robotics (22%), 5G technology and artificial intelligence (AI) and machine learning (both 21%) and the Internet of Things (IoT) (20%) are identified by companies in Europe as important to their businesses in the next five years. Reducing costs and improving productivity are the most common benefits expected from these technologies.

 

Europe shares the lead with North America on data security technology and is slightly ahead on facial/image recognition and wearables. European companies actually view Europe as being the technology hub across all of the top technologies – AI, facial/ image recognition, 3D printing, AR, IoT, wearables, 5G, robotics, blockchain and data security.

 

“Paul Edgar, CEO of HSBC Armenia stated ‘We also see the key themes of this research being relevant to Armenia.  With GDP growth at above 5%[1] and the government continuing to focus on the economy and judicial system, we see the business outlook as broadly positive.  As an IT hub, we believe Armenian tech companies are also well placed to take advantage of the developments in transformational technologies.  Trade within the EEU is also expected to continue to grow which will help boost exports from Armenia to other members of the customs union, most notably Russia.  We are also seeing growing interest in two-way trade with Europe and Asia, most notably China.”

 

 

The outlook for Russia

 

78% of companies in Russia expect to grow next year, according to the 2019 HSBC Navigator survey shows. The region is aligned with Europe in that there are slightly fewer companies anticipating high growth of 15% or more in the next year (18% versus 22% globally). Only 34% of companies are expecting total or substantial change in their business in the next five years. That’s considerably below the global average of 50% and the European level of 41%.

 

Russia retains strong trading links with the rest of Europe, but regions like China and the US are increasing in importance. European trade has decreased slightly from 77% in 2018 to 70% this year, with Germany and Belarus the most important partners.

 

In 2019, 54% of firms say they feel protectionism is increasing, compared to 60% last year. But the overall figure is in line with the European average of 55%, which is behind the global average of 65%.

 

Russian businesses believe that sustainable business practices can grow sales, help them to meet regulatory standards, gain a reputational advantage and give them a competitive edge. Environmental, social and governance (ESG) metrics are relevant for and being measured by companies, but at levels that are amongst the lowest globally.

 

Russian firms place robotics ahead of all key innovations. Companies in the region expect that robotics will improve productivity (52%), reduce costs (50%) and improve the quality of their products and services (47%).

 

 

 

About HSBC Navigator Europe

 

The HSBC Navigator survey, which is the largest of its kind, is conducted on behalf of HSBC by Kantar. The study gauges sentiment and expectations of businesses in the near to mid-term future on topics including: business outlook, international trade, geopolitics, sustainability, technology and wellbeing. It is compiled from responses by decision-makers at 9,131 businesses – from small and mid-market to large corporations – across a broad range of industry sectors in 35 markets. Sample sizes for each market were chosen to ensure the statistical accuracy of results, with 3,677 businesses surveyed in 13 European markets (Belgium, France, Germany, Greece, Ireland, Italy, Netherlands, Poland, Russia, Spain, Sweden, Switzerland, UK). Global results are based on an average of the 35 markets (using weights based on each market’s share of world trade). The survey was conducted between August and September 2019. Interviewees were polled on a range of questions including expectations around future growth in trade, attitudes toward trade policy developments and strategic business plans. The survey represents a timely source of information on the fast-evolving international business environment.

 

HSBC Holdings plc

HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. HSBC serves customers worldwide from offices in 65 countries and territories in our geographical regions: Europe, Asia, North America, Latin America, and Middle East and North Africa. With assets of US$2,751bn at 30 June 2019, HSBC is one of the world’s largest banking and financial services organisations.

 

HSBC in Armenia

HSBC Bank Armenia cjsc was established in 1996. The bank is a joint venture between the HSBC Group, which has 70 per cent ownership, and a member of overseas Armenian business with 30 per cent ownership. HSBC Armenia serves around 30 000 customers through eight offices located in Yerevan and around 392 employees. As of 31 December 31, 2018, the bank has assets of AMD 268 billion including the ones, allocated with the mediation of the HSBC Holdings plc.