KPMG 2024 CEO Outlook – UK

It’s ten years since we first launched the KPMG CEO Outlook. And we’re back this year with more insights into what’s keeping CEOs up at night and what they’re prioritising.

In 2024, we’ve surveyed 1,325 global business leaders – including 150 from the UK – overseeing companies with revenues of at least US$500 million from some of the world’s biggest economies and key industries.

The responses from UK CEOs show they’re feeling positive about growth prospects. But they also feel under more pressure as they continue to face an array of interrelated challenges.

To tackle them, they’re pursuing strategies to build more resilient, agile and innovative businesses. And they're looking to invest in the right tech and talent to deliver sustainable growth.

We’ve pulled out the key findings from the responses of our UK sample. Look out for further opinion and practical insights on the key themes from our KPMG experts.

While their confidence levels have fallen slightly over the past year, UK CEOs remain upbeat about the prospects for growth. But they’re feeling the pressure to ensure the long-term prosperity of their businesses.

That’s not surprising given the host of interrelated challenges they face. Just look at the challenges they say are top of mind today: the race to embed generative AI and other technologies, economic uncertainty, and geopolitical complexities.

In response, the majority of UK CEOs say they’ve already adapted their growth strategies – and the rest have plans to do so.

• Growth prospects: 75% confident in company; 76% in industry; 79% in UK economy; and 70% in global economy
• 63% feel under more pressure to ensure the long-term prosperity of their business
• 60% have already adapted their growth strategy as a result of interrelated challenges

Cyber security has leapt back to the top of the list of threats to growth over the next three years – no doubt, that’s at least partly due to growing threats presented by AI.

There’s also been a resurgence for supply chain risks. As political turmoil continues to disrupt the supply of goods, organisations are having to find new, often longer, routes and incur higher costs.

The response from CEOs is to focus on advancing the digitisation of their businesses. That’s essential to increasing resilience. And it provides the platform for integrating emerging tech – to improve productivity and enable innovation.

CEOs also have a keen understanding of the importance of their people. They need people with the right skills to drive innovation. And they’re not (yet) envisaging a future where tech takes the roles of their people – more on that later. 

• Top operational priority to drive growth: #1 advancing digitisation and connectivity across the business, #2 Employee value proposition to attract and retain the top talent

Generative AI is a top investment priority for over two-thirds of UK CEOs. They recognise its huge potential to upskill their people, and to drive efficiency and productivity gains.

But we’re coming out of the hype phase – and some of the initial excitement has worn off.

So far, the adoption of generative AI has largely been about experimentation, providing relatively small gains in productivity.

• 68% agree that despite ongoing economic uncertainty, generative AI is a top investment priority for their organisation.
• Top benefits of gen AI: #1 upskilling the workforce for future readiness, #2 Increased efficiency and productivity (through automating routine operations)

The next phase of AI is where we’ll see the bigger gains – and a bigger impact on how we work. It’s where generative AI becomes integrated into how we operate and enables more strategic R&D as well as greater innovation.

There are hurdles to jump to get there though.

First, organisations need to put in place clear frameworks for measuring the value of AI initiatives. That will enable them to prioritise activities that deliver the greatest impact – and ensure investments in AI are aligned behind business priorities. It should also bring forward CEOs’ estimates on ROI.

They also need to get their data in shape. That’s essential to building trust in generative AI – that it's providing accurate responses and not hallucinations.

CEOs would like greater clarity on AI regulations too.

• Just 43% are confident they have their data ready to safely and effectively integrate generative AI.
• 69% agree the pace of progress on generative AI regulations will be a barrier to their organisation's success.

Ask UK CEOs what challenges are top of mind and ‘competition for talent’ comes right down the list. Ask them what the top risks to growth are and talent is down near the bottom.

When forced to prioritise, CEOs’ focus is on emerging tech and the impact of geopolitics. Delve deeper though and it’s clear that CEOs recognise the vital importance of their people.

They recognise that they need access to the right talent to get the full benefits of emerging tech and to deliver sustainable growth. And they know that’s going to take more than upskilling their people – a huge task in itself. It’s going to mean investing in lifelong learning in communities.

• 63% say lack of the right talent will negatively impact their organisation’s growth over the next three years.
• 69% agree organisations should invest in skills development and lifelong learning in communities to safeguard access to future talent. 

One area where upskilling is vital is generative AI. Only two-fifths (42%) of UK CEOs are confident that their employees have the right skills to fully leverage its benefits.

CEOs think generative AI will impact what their people do and the skills they need. But they aren’t expecting it to put people out of work. Just 2% of UK CEOs think generative AI will reduce the number of jobs in their organisations.

In fact, CEOs are optimistic about job growth, with the vast majority expecting to increase headcount over the next three years.

• 92% expect their headcount to increase over the next three years; 36% by 6% or more. 

CEOs have become further entrenched in their view that employees will be back in the office full-time within three years. Last year, almost two-thirds (63%) expressed that view. This year, it’s over four-fifths (83%).

But today’s employees expect a more flexible working environment and better work-life balance. So, it will be interesting to see how CEOs’ views on the return-to-office debate play out against their recognition that the employee value proposition is key to attracting and retaining top talent.

• 83% expect a full return to the office over the next three years (63% in 2023) 

CEOs are not just focusing on ESG because of regulatory requirements or because it’s the right thing to do – although both are very strong reasons. They recognise that it’s also key to achieving sustainable growth.

They say that failing to meet stakeholder expectations on ESG could see competitors gain an edge, make it difficult or more expensive for them to raise finance, and even impact their tenure as CEO.

CEOs know they need to up their game. Less than half (47%) of UK CEOs are ready to withstand scrutiny from shareholders or other stakeholders when it comes to ESG. But at least UK CEOs are more confident than their global counterparts – just 34% of our full global sample said they’d be prepared.

• Biggest downside of failing to meet stakeholder expectations on ESG: #1 Competitors gaining an edge, #2 Threat to continued tenure, #3 Difficulty raising finance.

Many organisations have made commitments to hitting net zero by 2030. Only half (55%) of UK CEOs are confident they’re going to meet them.

So, what’s getting in the way? UK CEOs say the biggest barrier is the complexity of decarbonising supply chains. That’s unsurprising given that for most companies, the majority of emissions are actually scope 3 – indirect emissions in the value chain.

CEOs also bemoan a lack of technology to gather and analyse climate data. The biggest issue here is not necessarily the tech though – it’s the lack of data in the first place.

• Just 55% are confident they can meet their net zero goals by 2030.
• Biggest barriers to hitting net zero targets: #1 Complexity of decarbonising supply chains, #2 Lack of appropriate technology solutions to gather and analyse data, #3 Lack of skills and expertise to successfully implement solutions. 

CEOs don’t expect to see a significant ROI for at least three years.

If sustainability leaders want to move the dial and accelerate ESG, they need to build stronger investment cases. That’s going to take a firmer grasp of how to measure and communicate the value from sustainability initiatives.

Leading organisations are integrating sustainability into core strategies to drive profitability and long-term value.

• 86% expect it will be three years or more until they see a significant rate of return on their ESG investments.