For the first time ever, PwC Luxembourg has asked CEOs in Luxembourg about the trends reshaping business and society. In this survey, PwC reveals that 51% of Luxembourg CEOs (global: 38%) are very confident about their company’s growth prospects in the next 12 months while 26% (global: 29%) believe global economic growth will pick up in 2017.

The findings released today show that while business leaders are more positive in their outlook, their levels of concern about over-regulation (95%), geopolitical uncertainty (91%) and cyber threats (76%) are very high.

John Parkhouse, CEO of PwC Luxembourg, comments:

“CEOs in Luxembourg are very confident about prospects for the local economy while holding a cautious view of the global state of the economy. They told us these three concerns were on top of their mind: succeeding in the 21st century will be redefined; embracing technology; and meeting stakeholders’ expectations means implementing various changes.”

Confidence in revenue growth

According to PwC’s survey, 51% of CEOs in Luxembourg are very confident about their company’s prospects for revenue growth over the next 12 months – a contrast to only 38% of global CEOs being upbeat about the immediate outlook for revenue growth.

This suggests that Luxembourg CEOs have confidence in the various government and private sector initiatives that aim at creating a new dynamic for the country, as well as in their company’s capacity to serve clients and continue being profitable in this uncertain environment.

Where CEOs will look for growth

Luxembourg CEOs are largely optimistic about local growth prospects. According to PwC’s survey, 53% of CEOs believe that economic growth in Luxembourg will improve in 2017. However, a few 26% (global: 29%) of them believe that economic growth will improve globally. When it comes to Europe, Luxembourg CEOs have even lower expectations. With Brexit taking shape and elections coming up in the largest European Union Member States, uncertainty is without a doubt influencing their confidence level.

Despite globally uncertain growth expectations, CEOs are still looking abroad to expand their business.

The top five most important countries for growth identified are (1) France, (2) Germany, (3) Belgium, (4) the UK and (5) Italy.

José-Benjamin Longrée, Market Leader at PwC Luxembourg, comments on the outcome of Brexit:

“The potential impact of Brexit is also on the minds of CEOs in Luxembourg. Interestingly, CEOs from non-financial sectors are confident that Brexit will not have a major impact on their business in the future, while CEOs operating in the financial sector believe there will be a positive impact in the next five years.”

“The direct impact that Brexit has on Luxembourg-based companies will depend on their ties with the UK. Only 37% of non-financial-sector respondents sell in the UK, while 63% of respondents from financial sectors service clients in the UK. Clearly, Brexit’s impact on the Luxembourg economy will initially spread through the financial centre.”

Giving success another flavour

Companies have to adapt in a rapidly changing environment to meet different stakeholder demands. Whereas companies used to define success based on profit, 89% of Luxembourg CEOs (global: 76%) believe that it is now defined by more than financial profit.

Luxembourg CEOs consider it imperative to (1) prioritise long-term over short-term profitability, (2) put corporate responsibility at the core of everything, and (3) report on both financial and non-financial matters.

José-Benjamin Longrée says:

“More than a third of Luxembourg companies are currently reporting on non-financial matters, and/or placing corporate responsibility at the core of their operations.”

“Trust is the cornerstone of success. When there is a high level of trust in a company, it drives business performance by attracting new customers and retaining existing ones. It also makes employees more committed and investors more prepared to entrust stewardship of their funding.”

Technology to transform customers’ expectations

According to Luxembourg CEOs, technological advances are the trend that will have by far the biggest impact on stakeholders’ expectations. In Luxembourg, financial-sector companies are actively looking at the latest advances in the field of FinTech and are preparing to embrace the digitalisation of their business models.

Laurent Probst, Economic Development & Innovation Leader at PwC Luxembourg, comments on innovation:

“The rise of FinTech is a source of opportunity according to CEOs in Luxembourg, specifically in expanding products and services and reducing headcounts.”

Business leaders are well aware of the impact that technology has on client expectations and are investing in technology, not only to reduce costs but also to enhance interactions with customers.

According to PwC’s survey, 68% of CEOs in Luxembourg (global: 65%) believe that customer-relationship management systems will generate the greatest returns in terms of engagement with wider stakeholders. They cited web-enabled collaboration tools as the second-most impactful technology to generate the greatest return for stakeholder engagement. However, Luxembourg CEOs are less keen on using social-media tools (38%) than global CEOs (global: 50%). They are also less likely to believe in R&D investment compared to their global counterparts.

Although many worry that technology will eliminate jobs, technology creates new jobs.

Laurent Probst adds:

“CEOs still need skilful people in their businesses. Case in point: More than 50% of our surveyed CEOs are optimistic about increasing their headcount over the next 12 months. However, it is difficult for them to find people with the right skills. 24% of Luxembourg CEOs said there was an inadequate skills base in Luxembourg for their needs, while 65% find a somewhat adequate skills base.”

Luxembourg is gearing for change

Most CEOs in Luxembourg feel confident about their organisational structure and operating model. According to PwC’s survey, 55% of CEOs in Luxembourg stated that their current organisational structure and operating model is suited to meet stakeholder expectations and economic challenges.  Meanwhile, 42% answered that they plan to make necessary changes in the future.

Over the next year, CEOs in Luxembourg are primarily planning to implement cost-reduction initiatives.  Other restructuring activities that are on their mind include entering into a new strategic alliance or joint venture, and outsourcing a business process or function.

According to PwC’s survey, CEOs are making changes to adapt to changing stakeholders’ expectations. Their highest priority is on brand, marketing and communications management.

Laurent Probst concludes:

“Over the last three decades, Luxembourg has experienced very dynamic economic growth, based on traditional activities in the financial and non-financial sectors. As it becomes clearer that the current economic model is ending, public and private sector partners are considering initiatives to sustain growth. Several initiatives, including clusters, LHoFT and the Third Industrial Revolution, allow both the financial and non-financial sectors to create a new society.”

Explore more data of “Inside the mind of CEO: a Luxembourg perspective” on PwC Luxembourg’s website.