All change in business confidence for major world economies

• Business owners in the US and UK show dramatic falls in confidence
• Powerhouses of the '60s-'80s, Japan and Germany, show major rise in optimism

The first results from the 2006 Grant Thornton International Business Owners Survey (IBOS) conducted in 30 countries around the world and published today (6 January 2006), show a marked shift in the mood of medium-sized businesses around the globe and a shift in optimism about the economy away from the robust performers of recent years such as the US and the UK.

The confidence of business owners in the US regarding the economy has dropped by nearly half from an optimism / pessimism balance (*see note below) of +62 to +32 in one year; and in the UK the fall has been dramatic - from +46 to just +8. At the same time, the economic powerhouses of the '60s-'80s, Japan and Germany, show equally dramatic improvements in confidence. Germany’s balance this year is +41, up from +17, -6 and -37 in previous years; and Japan, although still negative at -14, may be on the cusp of a serious revival in confidence having improved from balances of -27, -46 and -71 over the last three years

Overall, the survey shows that businesses in 26 out of 30 countries are optimistic about their economy's performance. And in 13 countries optimism has actually improved over the last year. However, in a range of major G8 economies including the US, Canada, UK, France and Italy, the mood is now certainly less confident. Four of the biggest drops in confidence in the whole survey are in G8 countries.

Said Jim Rogers, of Grant Thornton: "This has been a year of uncertainty in some of the world’s largest economies. Although all the hard economic growth indicators continue to be positive, there is an increased mood of pessimism which is hitting confidence. Whether it is the ongoing legacy of the Iraq conflict in the US and UK; hurricanes in the US; racial tensions and unrest in France, social and political events certainly appear to have impacted the mood of the business world.
Some former powerhouses of the '60s '70s and '80s, though, such as Japan and Germany appear to be significantly more confident about their prospects. And the big winners of recent years – the major new economic powers of the emerging world, China and India, continue to soar in economic confidence."

The most optimistic business owners of all, for the third year, are in India with an optimism/pessimism balance of +93 (+88, +83 and +25 in the previous three surveys); and in China, where business owners took part in the survey for the first time, the confidence score was a balance of +77.

Other very high confidence scores came from Ireland (up to +84 from +79) and South Africa (a score of +80, down slightly from +84 in the previous year).

Maurer, partner from Grant Thornton in the US said: "Although businesses continue to do well in the U.S. as evidenced by the strong GNP, there was definitely a different mood about the economy in November when a large part of this survey was taken. From pre-election problems in Iraq, to the hurricanes and worries about oil prices, business people were feeling more cautious."

"Along with this caution, U.S. business leaders are still optimistic citing the economic resiliency that has occurred in the face of other significant setbacks."

Echoing that sentiment, Graeme Forbes, a partner from the UK said: "In the UK, higher interest rates and taxes have reduced disposable income and consumer spending has slowed more abruptly than expected. Economic growth has slowed to its slowest since 1992 and optimism has fallen sharply. The UK confidence figure is actually below the overall EU figure for the first time for many years."

Vishesh Chandiok, Partner and Director of International Business, Grant Thornton, India comments: "India's business owners continue to thrive and remain very optimistic. The economy continues to be extremely buoyant, the stock market is breaking all time highs on a weekly basis, foreign direct investment has increased substantially, global acquisitions by Indian companies have growth exponentially and overall business confidence is extremely positive. The growing reliance on the private sector and trade liberalisation - here just like in China - is proving fruitful for medium-sized enterprises who are taking full advantage and thriving as a result."

Ends

Notes to editors

The Grant Thornton International Business Owners Survey (IBOS) was carried out among more than 7,000 owners of medium-sized businesses from 30 countries during Autumn 2005. IBOS began in 2002 and builds on the European Business Survey (EBS) which Grant Thornton ran from 1993 to 2001. The research was conducted by Experian Business Strategies Limited and Harris Interactive.

*The figure is the percentage balance of the respondents who are optimistic and those who are pessimistic.

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