UK CEOs remain optimistic despite global challenges

Business confidence among UK chief executives is on the rise despite ongoing geopolitical and macroeconomic challenges, according to the latest survey conducted by EY-Parthenon.

The survey revealed that 82% of CEOs are either very or somewhat optimistic about the business landscape over the next year, which marks a significant increase from 67% in September 2024. This positivity extends to expectations about company performance, with 78% of CEOs optimistic about revenue growth, 80% confident in profitability, and 77% assured about maintaining a competitive position.

Despite the optimistic outlook, UK CEOs remain mindful of potential challenges. The survey highlighted that 71% of respondents believe that rapid technological advancements, evolving sustainability agendas, and geopolitical tensions could shift compliance requirements, distinguishing industry leaders from laggards.

As UK business leaders plan transformation initiatives for the coming year, their focus will be on customer engagement (45%), achieving sustainability targets (43%), and enhancing operations through digitisation and productivity improvements (43%). Nevertheless, some areas of their transformation strategies require attention. Nearly one-fifth of respondents acknowledged a need to accelerate the speed of transformation, while 18% highlighted the importance of improving outcomes through greater cross-functional collaboration. Additionally, 24% cited cost and return on investment (ROI) as influential factors on their digital transformation approach.

Silvia Rindone, UK&I Managing Partner for Strategy and Transactions at EY, stated, "Our latest CEO Outlook reflects a resilient and forward-thinking mindset among UK CEOs. However, with nearly a quarter citing cost and ROI as key factors in shaping their digital transformation strategies, it's clear that businesses are seeking a balance between innovation and sustainable growth. The coming year will be crucial for organisations to refine their transformation approach and unlock long-term value."

The survey also indicates an anticipated rise in dealmaking activity in 2025, as the UK remains the top investment destination for UK CEOs. Of the surveyed executives, 99% plan to actively engage in transaction initiatives over the next year, with 62% focused on mergers and acquisitions, up from 40% in September 2024. Furthermore, three in five respondents intend to pursue joint ventures or strategic alliances, while 45% are considering divestments, spin-offs, or IPOs. Improving product and process innovation ranks as the top priority when evaluating potential acquisitions, identified by 46% of respondents.

The UK continues to be the preferred destination for capital investment, with 52% of CEOs planning domestic investments. The United States, France, Germany, as well as Canada and Switzerland, were recognised as additional key investment locations.

Silvia Rindone further commented, "With M&A activity set to rebound in 2025, driven by strategic imperatives, digital innovation, and a more favourable regulatory climate, business leaders must prioritise diligent, data-driven investment decisions to capitalise on emerging opportunities."