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While similar challenges face Europe-wide markets, some countries show more resilience and positive outlook in the short term.
Optimism is most clearly seen in Germany, where 72% of CEOs (the highest share of all European regions) expect higher revenues in 2024 compared with 2023. EY analysis of the top 100 German companies by market capitalization indicates that nearly 90% have raised their revenue forecasts for FY24 as they align themselves to the new economic dynamics. This is despite a challenging economic backdrop amid cooling global demand, an industrial sector downturn and squeezed consumer purchasing power.
Revenue is not the same as profitability, with the latter being adversely impacted by higher costs in supply chain, energy, finance and the workforce. In a fragile economic environment with stubborn inflation, 35% of German CEOs (vs. 23% of European CEOs) believe it is difficult to pass on higher costs to customers who may be able to negotiate better prices or seek out cheaper alternatives. Therefore, optimizing operational efficiencies and reducing their cost base is a priority for German CEOs to maintain competitiveness and market presence.