PwC’s 26th Annual CEO Survey shows UK CEOs are under no illusions that after a tough few years things are about to get tougher still.
As they deal with challenges such as high inflation, the cost of living crisis and continued geopolitical disruption they are exercising caution and exploring short-term measures to mitigate the impact on their business. But at the same time they are resolutely focussed on strategic investments, specifically in the talent and technology needed to transform their businesses and ensure long-term growth and viability.
The survey reveals UK CEOs are confident the interventions and investments they have planned will keep them on track, help them overcome the immediate challenges they face, and prove successful in creating long-term value.
Economic
concerns...
71
of UK CEOs think global economic growth will decline this year
84
think UK economic growth will decline this year
29
feel highly or extremely exposed to macroeconomic volatility
40
feel highly or extremely exposed to inflation
…create a need
for caution
60
say they have put up prices
42
have found alternative suppliers
52
have reduced operating costs
21
have slowed investments
The imperative to transform
The research found 22% of UK CEOs believe their business will not be economically viable within a decade on its current course, while 10% believe they have less than three years.
Marco Amitrano, Managing Partner and Head of Clients and Markets, PwC UK, says: “Whatever short-term cuts and caution CEOs have planned they cannot rein in investments in talent and technology. They’re doubling down on those because the need to transform their business for long-term growth is inescapable. But at the same time, vital skills are in short supply and tech investments carry risk if made without the right human insight. So CEOs must get creative and explore combinations of acquisition and collaboration, alongside investments in upskilling, recruitment and retention to deliver the tech-powered change they need at the speed they need it to happen.”
These findings highlight the extent to which the pace of change affecting all organisations means significant interventions are essential for long-term viability and growth - from accelerating digital transformations, to building greater supply chain resilience and creating business models that are both environmentally and financially sustainable.
Marco Amitrano, Managing Partner and Head of Clients and Markets, PwC UK
CEOs are doubling down on investments in talent and technology because the need to transform their business for long-term growth is inescapable.
Among CEOs investing in technology, the majority are doing so with an emphasis on reinventing, rather than just maintaining, their current business (61% compared to 39%).
Antony Cook, Consulting Partner, PwC UK, says: “Almost every organisation is feeling an imperative to make changes to secure their long-term future. We’re helping clients with both fundamental and functional transformations. But at the heart of every change is the need for human insight and experience combined with an understanding of the role technology plays in delivering the right results at speed and scale.”
40% of UK CEOs believe the tech skills and understanding of their teams lag behind the demands of their strategic objectives. That gap will only widen without urgent action and investment in talent and technology.
Sam Samaratunga, Head of Risk, PwC UK, says: “While caution is an essential part of any risk response, organisations that identify opportunities amid constant disruption and take risk in an intelligent way can become more agile and adaptable. They can also build resilience by design. With the right combination of human insight, data and analytics, these opportunities can be better understood and decisions taken with greater confidence. Get this right, and the organisation will gain competitive advantage. Not only can they weather disruption, they can also move faster, protect their reputation and build trust through that process.”
Antony Cook, Consulting Partner, PwC UK
At the heart of every transformation is the need for human insight combined with an understanding of the role of technology.Watch: Human-led, Tech-powered: Trust and Transformation
Investing in talent
While some layoffs are planned as part of wider cost-cutting measures there is a far more significant focus among CEOs on boosting their team’s ability to drive long-term growth and transformation. They are doing this through increased investment in recruitment, upskilling and the retention of in-demand skills. Just 16% of CEOs say their organisation has made or is making layoffs, while 59% have no intention of making layoffs.
A resolute focus on talent
Sheridan Ash, CEO and Founder of Tech She Can
The lack of available talent is the biggest thing holding back productivity.Read Sheridan’s interview
74
are upskilling their workforce in key areas
56
are upskilling their workforce in technology
54
are increasing investment in retaining tech talent
48
are increasing investment in attracting tech talent
However, developing talent can take time, and recruitment is challenging with skilled candidates in too-short-supply. As such, CEOs are looking at other ways to meet an urgent need for tech skills, including partnering with other organisations.
Kieragh Nelson, Partner, Execution Managed Services, PwC UK, says: “CEOs know they can’t hit pause when it comes to increasing their technology capabilities. In many instances, they can’t even wait until they’ve upskilled their workforce or recruited the right candidates. But accelerating their ambitions while the economy is slowing down presents a challenge. Our clients are coming to us because they need a digital business partner who can provide agile and scalable delivery services, to give them critical capabilities now, while working with them to develop in-house capability for the long term.”
Partnering and acquisition will help bridge gaps
41
are investing more in external partnerships to get better access to tech capabilities
21
are planning to acquire other organisations to obtain tech skills and capabilities
Kieragh Nelson, Partner, Execution Managed Services, PwC UK
CEOs know they can’t hit pause when it comes to increasing their technology capabilities.Watch: Human-led, Tech-powered: Culture and Capability
Similarly, organisations are also looking at acquiring businesses that can give them a technological edge.
Tim Allen, Deals Partner, PwC UK, says: “Organisations are exercising understandable caution around some deals and investments. But there remains real intent and momentum around deals that bring greater technological skills and digital capabilities. Every deal I’m seeing right now has technology at its heart. It’s an area businesses cannot afford to hold back.”
Tim Allen, Deals Partner, PwC UK
There remains real momentum around deals that bring greater technological skills and digital capabilities.Watch: Human-led, Tech-powered: Vision and Value
Prioritising technology
Investments in technology are also being prioritised, including artificial intelligence (AI), cloud and data and analytics. And such investments can play a vital role in helping organisations deal with immediate challenges and deliver long term value.
Automation, AI and Cloud are the focus of tech investments
86
are investing in automating processes and systems
77
investing in deploying advanced technologies such as cloud and AI
Tom Lewis, Technology Partner, PwC UK, says: “AI can help organisations automate tasks so teams can be upskilled and redeployed. But it’s not just an efficiency play, it’s key to enabling organisations to move at speed and make better data-driven decisions. Cloud too can help reduce cost and complexity today, but is also the foundation on which digital transformations will be built, from quickly delivering new services and platforms to giving organisations more advanced analytics capabilities and creating closer integration, across businesses, ecosystems and supply chains.”
Given the importance of such digital transformations, CEOs remain acutely aware of the risks posed by cyber security threats, ranking them as the threat they feel most exposed to over the next five years. And as CEOs commit to investments in technology there is a focus on striking the right balance of skills and understanding across their workforce. Increasing that understanding can help mitigate risk and ensure organisations get the greatest returns on investment in technology.
“CEOs don’t need everyone to become a technologist,” adds Lewis. “But they do need everyone to understand what technology can do for them - what the art of the possible is. And there needs to be sufficient technologists to turn those ideas into realities. Those organisations will be more adept at delivering long-term value while dealing with challenges today.”
Steve Hare, CEO of Sage
Artificial intelligence is freeing up smart people. And companies are retraining and redeploying those people on tasks that add greater value.Read Steve’s interview
Deborah Waterhouse, ViiV Healthcare
This year, my focus will be on a deeper dive into the technology that will change the way the world works. As a CEO you’ve got to make enough time to step back and learn.Read Deborah’s interview
Sam Samaratunga, Head of Risk, PwC UK
Organisations that take risk in an intelligent way can become more agile and adaptable.Watch: Human-led, Tech-powered: Risk and Resilience
Striking a balance of talent and technology
Crucially, many CEOs are investing in increasing tech skills and understanding across their organisation, including areas such as finance, HR, operations and sales. And they are also investing in technology and technology services in those areas.
Marketing is an example of one area where there is a significant commitment to transforming both technology use and skills within the function. The need to adapt offerings, understand changing customer demands and keep selling in the short term creates an essential role for marketing. But the opportunity to make marketing a more strategic driver of long term growth and brand value is indicative of the balancing act businesses are striking and the requirement for a combination of skills and technologies.
Alex Mahon, CEO of Channel 4
We’ve had to switch where we distribute and what platforms we’re on. You can’t pretend you will drag young people to the ways we’ve historically done business.Read Alex’s interview
Where are CEOs investing in technology and talent?
Vicky Davies, Danske Bank
I don’t see a world where we are only a digital player and we completely cut off the human touch.Read Vicky’s interview
Tom Adams, Experience Consulting and Marketing Transformation Leader, PwC UK, says: “Tough times bring extra scrutiny on marketing budgets. But there’s an important difference between marketing budgets, which are a short-term consideration, and marketing capabilities, which are a driver of long-term value. Cutting capability represents a false economy. As does looking for shortcuts through the use of automation without the right level of human experience and oversight. You can’t just oversteer towards technology.”
Read: PwC CMO Study: Creating a marketing renaissance
Getting the balance right means evaluating current capabilities and reevaluating needs as they change, recognising when one side of the balancing act needs a boost, to get the best out of the other. In areas such as Legal and Deals, for example, more CEOs say their organisations are planning to invest in talent than technology.
Bron Alexander, Markets and Services Leader, Deals, PwC UK, says: “In the Deals space there is a lot of access to data and a real focus on finding the talent to manage, manipulate and unlock the power of that data. In the right combination these investments create greater value and yield better results. We see this within our own teams, and within our clients’ teams.”
Perhaps no priority area better exemplifies the need to balance short-term urgency with long-term change than addressing the impact of business on the environment and society. The survey shows, 43% of UK CEOs say they will invest in decarbonising their business model this year, 43% are investing in technology to support their ESG efforts and 55% are investing in upskilling their people to make better use of technology to support ESG.
Encouragingly, last year’s survey saw a third of businesses had a plan to deliver net zero, but questions lingered about how robust those plans were. This year’s survey reveals 65% of CEOs now report having a strategy that is measurable and data-driven. This suggests significant progress but there is more to be done and a shrinking window of time to do it.
Lynne Baber, Sustainability Practice Leader, PwC UK, says: “Tackling the climate emergency and building greater trust and equity in society cannot wait until the latest disruptions have run their course. Action is needed now. Embedding positive change into business strategy - so profit and purpose are not mutually exclusive - requires understanding, insight, leadership, and robust data and reporting against consistent metrics. That is how organisations will show where change is needed, provide confidence progress is being made and support decisive interventions where it isn’t.”
Bron Alexander, Markets and Services Leader, Deals, PwC UK
In the right combination, investments in talent and technology create greater value and yield better results.Watch: Human-led, tech-powered perspectives from across PwC UK
Stefano Agostini, CEO of Nestlé UK&I
It is imperative to our business that we take the lead and inspire others to protect, renew, and restore resources.Read Stefano’s interview
Spotlight on ESG
55
of CEOs are investing in the tech skills and understanding of their ESG teams
43
are investing in technologies and solutions to support their ESG efforts
31
have implemented - 34% are progressing - a measurable data-driven strategy to reduce emissions
Lynne Baber, Sustainability Practice Leader, PwC UK
Tackling the climate emergency cannot wait until the latest disruptions have run their course.Watch: Human-led, Tech-powered: Purpose and Profitability
The power of positive action now
The survey reveals that UK CEOs are confident the interventions and investments they have planned to safeguard their future and drive long-term growth will pay off.
Once they have secured the talent and tech capabilities they need and put in place necessary changes across their business, CEOs are confident they will be in a much stronger position than they find themselves in today.
This can be seen in their responses when asked about their three-year outlook and offers reassurance that the business leaders of today are making investments that will drive economic growth for business through current disruptions and into the future.
Critical action creates a confident outlook
48
of CEOs are very/extremely confident about their revenue growth prospects over the next 12 months
64
This rises to 64% when asked about their three-year outlook (with 31% moderately/slightly confident)
Tom Fussell, CEO of BBC Studios
There is no doubt we will have ups and downs in the short-term but I’m confident in our long-term ability to double the size of the business.Read Tom’s interview
Human-led, Tech-powered series
What does it mean to be human-led, tech-powered?
In this series, Hannah Fry asks business leaders, experts and academics that very question. Together they discuss and debate the importance of combining human ingenuity with technology to create positive outcomes for people, business and society. Watch now.
CEO interviews
Read what other UK CEOs have to say about their priorities, business leadership and issues of trust, talent and technology.
Alex Mahon
Channel 4
Deborah Waterhouse
ViiV Healthcare
Sheridan Ash
Tech She Can
Stefano Agostini
Nestlé UK&I
Steve Hare
Sage
Tom Fussell
BBC Studios
Vicky Davies
Danske Bank
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Alliance Senior Partner elect - PwC UK and Middle East I Managing Partner & Head of Clients and Markets, PwC United Kingdom
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