New research suggests European lessors anticipate higher volumes as well as increased, IT, marketing and training spend

Leaseurope and Invigors EMEA have just completed their latest European Business Confidence Survey. The findings reveal considerable optimism towards the business outlook for 2014. 

With the economic prospects for Europe improving and concerns caused by the eurozone crisis now consigned to the past, most of those taking part in the latest survey expressed a positive opinion on the outlook for their businesses over the first half of 2014.

Expectations of new business growth are particularly bullish. Nearly three quarters (74%) of those surveyed anticipate growth in new business this year, up from 54% in the previous survey last June. The proportion of respondents forecasting no change has fallen from 26% last June to 16% in December while the number predicting a fall in new business has halved to just 10%. 

Anticipated change in new business volumes over next six months

Respondents’ expectations on bad debt have shown an improvement since the survey in June of last year, although the majority of respondents (59%) still anticipate no change. In the December research, 23% of participants predict that bad debt will increase in their organisations over the next six months, down from 35% previously, while 18% believe that it will decrease, up from 8% last June.

Greater pressure on margins

It appears that for a significant minority of respondents the increase in new business growth is expected to come at the expense of margins. Of those taking part in the latest survey, 29% predict that margins will decrease over the next six months, compared to 23% last June.  Over half of participants (54%) anticipate no change in margins, down from 59% previously, while just 17% believe that margins will increase, little changed from the June survey.

Despite the suggestion from some respondents that margins are coming under increasing pressure, for the majority of those surveyed, net profit for their business is projected to rise during the first half of this year.  61% expect net profit to increase, up from 55% last June, while 23% anticipate no change. Only 15% believe that net profit will fall in their organisations, down from 21% last summer.

Change in net profit for business over next six months

 

The more optimistic prospects for some of the industry KPIs are also, to some extent, reflected in expectations on expenditure. While many of the organisations represented in the research are clearly keeping a tight rein on budgets,  a  growing  proportion  of  respondents  anticipate  increased  spending  over  the  next  six  months, particularly on marketing, training and IT systems.

However, the outlook for operating expenses appears to be mixed.  32% of those taking part in the December survey predict that these will decrease over the next six months, the same percentage as those polled last June.

A further 27% expect that operating expenses will increase in their organisations, up from 20% previously while the remaining 41% anticipate no change.

Marketing & training prospects also rise

The prospects for marketing expenditure have improved significantly. 35% of respondents expect marketing expenditure in their organisations to increase over the next six months, nearly double the percentage recorded in the June 2013 research. A further 22% of respondents considered that marketing spending would decrease, down from 36% in June, while 43% anticipate no change.

The outlook for training expenditure in the latest survey was also more positive than back in June 2013.  In December, 30% of respondents were expecting training expenditure to increase in their organisations over the next six months, a marked increase from the 18% recorded previously. Just over half (53%) believed that expenditure would remain the same, down from 61% earlier, while only 17% considered that training spending would fall, a small decrease from the June survey.
Good news for software providers

Expenditure on IT systems also looks set to rise in a number of organisations.  In the most recent survey, just under half (49%) of those taking part in the survey predicted that systems expenditure will rise over the next six months, an increase from 39% in June of last year. A further 40% forecast no change in expenditure, down from 47% in June 2013, while only 11% expect systems spending to decline over the forecast period.

Anticipated change in systems expenditure over next six months

 

The December 2013 survey indicated that, for the majority of organisations represented in the research, staff numbers are projected to remain stable for the first half of 2014 notwithstanding a potential increase in new business.  However, there are differences in expectations between sales and non‐sales staff with the balance of opinion more favourable towards growth in sales personnel, while non‐sales headcount is more likely to be reduced.

33% of those surveyed in December expect that sales staff numbers will increase in their organisation over the next six months, around the same level as in the previous survey. Over half (54%) expect numbers to remain the same,  up  from  36%  in  June  2013,  while  only  13%  anticipate  a  reduction  in  sales  staff,  down  from  28% previously.