CEOs bracing for hiring freezes and lay-offs: KPMG survey

The professional services firm’s latest chief executive outlook shows 64 per cent were considering letting staff go.

The nation’s chief executives are preparing for a global recession next year, planning for hiring freezes and lay-offs, according to a survey conducted by KPMG.

The professional services firm’s latest chief executive outlook shows 78 per cent of CEOs surveyed were preparing for a downturn by planning or implementing a hiring freeze.

Most – 64 per cent – were also considering lay-offs.

KPMG Australia chief executive Andrew Yates said the survey was the first time in the past eight years that CEOs had been expecting a downturn.

He said the survey had shown there was now an expectation among business leaders in Australia that there would be “short, mild recession” over the next year. “There is quite a different sentiment in this year’s survey with a downturn being anticipated,” he said.

He said confidence had been hit by the pandemic, rising inflation and the Russian invasion of Ukraine.

“It is not surprising that CEOs’ normal optimism has taken a bit of a hit,” he said. “There is a short-term unease, with a large percentage of respondents saying they had taken steps to prepare for a downturn. Australia is better placed than most countries, so the probability of a recession here is lower than elsewhere.

KPMG says confidence had been hit by the Covid-19 pandemic, rising inflation and the war in Ukraine. Picture: NCA NewsWire/Brenton Edwards

“But there is still a risk that domestic demand contracts, rather than just grows at a slower pace.”

Eighty per cent of CEOs surveyed told KPMG they planned to increase their prices over the next six months to cover cost rises.

Mr Yates said how well the economy performed over the next 12 months would depend on how households responded to the higher inflation and interest rate outlook. “So far they have held up better than consumers in other countries, but the full impact of higher mortgage costs has yet to be felt,” Mr Yates said, adding that growth would also be shaped by capital expenditure plans and the scale of a return of international tourism and students.

Some 72 per cent of CEOs felt business transformation was being held back by a lack of skills in their organisation to cover the strategic and operational rollout. This was higher than the proportion of global CEOs – 61 per cent – who felt their plans were held back by lack of talent.

Mr Yates said the survey showed that Australian CEOs had a high degree of confidence in the medium term, with expectations that growth would return in the next three years.

“It is encouraging to see that, over the three-year horizon, leaders are more confident of a rebound in growth in the global economy and their own companies,” he said.

The survey also shows that ESG issues are weighing more heavily on the minds of chief executives, with companies seeing increased stakeholder demand and scrutiny on ESG issues.

Most of the Australian CEOs surveyed – 75 per cent – said they were seeing increasing demand for more reporting and transparency on ESG issues from stakeholders, including investors, regulators, employees and customers. But more than half were worried that they failed to communicate their ESG performance to stakeholders effectively.

Only 28 per cent of Australian CEOs said they believed their ESG programs were leading to improved financial performance, while 45 per cent of global CEOs felt they could show that their ESG work was having a positive impact on earnings.

Originally published as CEOs bracing for hiring freezes and lay-offs: KPMG survey