(Reuters) – The Russia-Ukraine crisis and soaring energy prices have nearly halved the confidence of European business leaders in the first half of the year and many corporations have passed on the costs to consumers, an industry survey showed on Tuesday.
The executives’ confidence plunged to 37 on a scale of 0 to 100 from 63 in the preceding six months, according to the survey conducted by the European Round Table for Industry (ERT).
Energy and commodity prices have skyrocketed globally after Russia was slapped with Western sanctions for its invasion of Ukraine, worsening inflationary pressures and hurting businesses which were already reeling from the COVID-19 pandemic.
About 85% of the 56 ERT members who responded to the survey said they already had raised or were planning to raise prices, while a large majority were also accelerating their plans to find new suppliers.
The survey authors added that half of the executives were planning to absorb price increases into their profit margins.
ERT members, which include energy giant Shell, automaker BMW, drugmaker GSK, planemaker Airbus and engineering group Rolls-Royce, also indicated that their expectations for the region’s economy over the next six months were worse than at the beginning of the pandemic.
About 40% believe energy prices will not return to pre-COVID levels before 2024, but more than a third also do not expect energy prices to return to those levels at all. The survey, however, indicated a somewhat positive appetite for hiring.
In addition to the Russia-Ukraine war, geopolitical tiffs with China and fresh lockdowns there are also hurting supply chains. While firms are finding new suppliers, 44% said cutting dependency on Chinese suppliers was not part of their strategy.
China’s retail and factory activity fell sharply in April as workers and consumers were confined to their homes, according to a last week.
(Reporting by Siddarth S and Pushkala Aripaka in Bengaluru; Editing by Hugh Lawson)
