UK CEOs are feeling more optimistic about their immediate prospects and are prioritising artificial intelligence (AI) investments to gain a competitive advantage, according to the latest EY CEO Pulse Survey.
The survey of 100 UK CEOs, which provides insights on AI, capital allocation, investment, sustainability and transformation strategies, found that 61% of UK CEOs said they felt more optimistic about their company’s profitability compared with 12 months ago.
When considering their strategic priorities for the next 12 months, half (50%) of all respondents are prioritising investment in technology, including AI, to improve growth and productivity, closely followed by enhancing data management and cybersecurity (49%).
CEOs and investors diverge on sustainability focus over next 12 months
Whilst UK CEOs are focused on technology investment in the immediate future, achieving net zero remains a long term priority.
Over half of respondents (56%) said sustainability was a higher priority compared with 12 months ago. However, CEOs are facing challenges in implementing robust ESG strategies, with 47% agreeing that their management teams struggle to present a strong business case for sustainability investments that clearly outlines their financial benefits. Seventy-one per cent (71%) agreed that activist shareholders are more concerned with their company meeting quarterly earnings targets than its performance against long-term sustainability metrics.
Respondents also believe there is an opportunity for AI to support sustainability performance, with 70% agreeing that technology and AI hold the answers to many of the key sustainability challenges society faces.
Silvia Rindone, UK&I Managing Partner for Strategy and Transactions, commented: “For UK CEOs, by far the most compelling immediate priorities involve enhancing existing technology to improve growth and productivity, as well as boosting data management and cybersecurity. However, this has come at the expense of achieving sustainability targets which are now considered more long-term priorities. This divergence between short-term financial returns and decarbonisation is shortsighted, so business leaders must ensure they remain committed to delivering these targets to move towards a more sustainable future.”
Strategic transactions remain a key focus for UK CEOs
Strategic transactions remain high on the agenda for UK CEOs, with 98% saying they expect to actively pursue transaction initiatives over the next 12 months. Of these, 79% are considering divestments, IPOs, spin-offs; 42% are looking at joint venutres or strategic alliances with third parties and 33% are considering M&A activity.
Forty-two per cent (42%) of those considering a strategic transaction said they were doing so to access new geographies, 39% to secure supply chains and 36% to acquire technology, new production capabilities or innovative start-ups.
Silvia Rindone said: “UK CEOs are using strategic transactions to achieve their their near-term priorities, with most looking to divest assets over the next 12 months to future-proof their business. However, it’s imperative that boards look beyond the short-term efficiency and productivity gains these transactions can bring and ensure they are continuing to focus on core operations, while actively looking for opportunities to raise capital to invest in their remaining portfolio.”
