Future of accountancy: a word from the experts
What do the next 12 months hold for the profession? Five industry experts offer their views
What do the next 12 months hold for the profession? Five industry experts offer their views
• John Collier of executive search consultants Clive
& Stokes International
There will always be a demand for top quality finance directors. And the
increasing technical complexities of accounting, reporting and compliance mean
that a professional accounting qualification is more valuable than ever. I see
no change in this in 2007.
But life is uncertain and a role as finance director at the top of even the
biggest UK listed companies is no longer a really safe place to be. Last year we
saw a number of foreign takeovers of major UK companies (such as BAA, BOC and
Pilkington) and I’ve no doubt there will be more in 2007.
There is every sign that the large private equity funds will continue
appraising opportunities and making huge, debt-fuelled bids for some of the
largest UK listed companies. There will be a number of senior finance directors
looking for new jobs as a result and some of them, ironically, will be attracted
by other private equity opportunities. I think the scope for reaping really
large financial rewards from a company backed by private equity is, however,
likely to be much more restricted in 2007. My advice to a prospective finance
director is to evaluate each opportunity very carefully and be prepared for good
but not outstanding rewards.
There will also be a continuing demand for talented finance directors for
smaller listed companies including those on AIM – which will also continue to
expand. AIM listed businesses from overseas in particular will need FDs who
understand the UK and can give a good account of their companies to investors.
But the pace will slacken because there is a finite capacity for such
investment opportunities among UK investment institutions and some of the wilder
issues have not done well in 2006 which is making investors more cautious.
There will also continue to be a strong demand for non executive directors
and especially those who are prepared to serve on and perhaps chair the audit
Despite fears that the demands of corporate governance are driving away good
candidates I continue to have more good people wanting non-executive roles than
there are places for them. I hope that boards will be prepared to draw in some
of this talent in 2007.
And last, but not least, you will no longer see any references to ‘age’ in
job adverts, profiles and evaluations. 2007 will be the first full year of the
new legislation. Experience so far suggests that length of service and years of
experience will replace chronological age which is probably a good thing but did
we really need another law to make it happen?
• Peter Wyman is head of professional affairs
There will be no major UK corporate scandal which will cause government,
regulators or commentators to conclude that there is a systemic failure in UK
financial reporting, corporate governance or auditing. On the other hand,
however, there will inevitably be the normal spate of corporate failures
associated with any free market economy.
The government and the Financial Reporting Council will resist the temptation
to interfere in the audit market, recognising that it is indeed a market and the
markets find their own solutions. To the extent that companies and investors
believe there is too little choice, this will be corrected with work going to
those mid-tier firms willing and able to step up to the mark.
Although the Companies Act has received Royal Assent, it will not be
implemented in time for liability limitation agreements to be in place during
2007. But there will be public discussion and consultation so the agreements
will be in place in 2008. Meanwhile, liability reform across Europe will quicken
in pace and there may even be surprise moves in the US.
The debate on the future of corporate reporting will move into the more
positive and creative phase, with all stakeholders recognising that the present
form of reporting is not meeting their needs. Stakeholders will recognise that
all the ingredients have been created over the past 15 years, but that the time
has come to reassemble them to meet stakeholder needs, with the primary focus
being on the needs of shareholders.
Relationships between business and HMRC, which have reached an all-time low,
will improve dramatically during 2007 as both sides recognise the need to
respect and meet each other’s legitimate needs.
• David Jones is UK managing director at Robert Half
Finance & Accounting
Skilled financial professionals will remain in high demand across all markets
in 2007 be it in practice, investment banks, or commerce and industry. There
has been a shortage of candidates coming into the market with the skills and
qualifications that employers need, and this trend is set to continue.
This gap between demand and supply across all sectors of the economy will
continue in 2007. However, the market, while candidate-driven, remains
competitive and employers are not only looking for candidates who are qualified,
but also those who are able to demonstrate the ‘softer’ skills, such as the
ability to communicate effectively.
Accountants in business today have a significant role to play in influencing
business decisions and guiding the organisation, so communication skills will
continue to be essential for success.
Financial regulations such as Sarbanes-Oxley and IFRS, and the backlash of
accounting scandals, have now changed the perception of accountants from the
stereotypic image of back-office number-crunchers and brought them to the
forefront as guardians of corporate governance. The role of accountants in 2007
will continue to evolve in this manner as regulations tighten and as new
directives come into place.
Today’s workplace is vastly different from five years ago, and the pace of
change demands flexibility. Historically, people have found themselves in
leadership positions simply because of their outstanding technical ability, but
employers now want finance professionals who can combine general accounting
skills with the potential for strategic leadership qualities.
In terms of salary expectations for next year, the outlook is positive. Our
research has revealed there has been a sequential increase in salaries year on
year and from what I can see in the market at present, I expect this growth to
continue during 2007.
• Phil Shohet is director of Kato Consultancy
There has been a radical change in the operational environment and
competition faced by mid-tier, medium-sized firms. Size is not simply the key
now; rather, focused services providing added value are now essential.
Competition is at two levels: large local firms moving down market to the
traditional SME base, and price/quality competition from local or specialist
niche practices. Competition for these firms is represented by the demise of the
mid-tier, considerable merger activity, succession and retirement issues, and
the Big Four getting bigger. The backdrop is a business environment of low
inflation, greater international awareness, possible change of government and
technological improvements and expertise being service and price driven.
Some mid-tier firms have found their profits squeezed through poor investment
and a slow market, and will be looking to merge within their peer group to
maintain their national status, or face becoming small-scale and vulnerable. In
the past 30 years, only one firm in the top 50 has maintained the same name. The
market conditions change so rapidly that further consolidation is inevitable.
Several Group A firms are struggling with low profits, too many owners and
the wrong mix of skills, and have not addressed how to fund the retirement of
older partners while maintaining profitability and remaining attractive for
potential equity partners.
Large local firms will become even more dominant in their geographical
domains, and will continue to acquire and build specialist niche practices
providing the relevant skills to continue to compete favourably with the
mid-tier and even the Big Four.
Overall, the picture for some mid-tier firms will be bleak as they are squeezed
by both Big Four and the larger local firms that continue to progress with the
acquisition of smaller focused firms. A wake-up call is required.
• Allen Blewitt is chief executive officer of ACCA
The publication of new international financial reporting standards for small-
and medium-size companies will be a key issue in the year ahead. These standards
are vital for national economies, given the fact that SMEs account for over 98%
of all enterprises and employ over 50% of the global working population.
We hope the draft standards, which are finally agreed, will be based on
clarity, transparency and relevance to SMEs. To that end, we hope that those
bodies and industry representatives consulted on the new SME standards make
their views known about the above principles and user-friendliness of those
ACCA wants transparency on where the revenues from green taxes are going.
Taxpayers know that sacrifices must be made to deal with global warming, but
they demand transparency on the application of green taxes.
The Pensions Bill is likely to restore the link between the state pension and
earnings, and extend the state pension age to 68. But it remains to be seen
whether the government will consider economic conditions adequate enough to
restructure the earnings link. We would want the Turner Report recommendations
delivered as a whole, not as a pick ’n’ mix.
Gordon Brown is likely to become prime minister, and we hope he would show
the same innovation that marked his first few days as chancellor in 1997, when
he created the monetary policy committee to decide on interest rates. Brown
should create a tax policy committee to drive tax change and advise on the
impact of fiscal changes. The TPC should comprise both private and public-sector
representatives and qualified tax practitioners.
And when major presentations are made about the future of accountancy, I
would hope that speakers will not feel compelled to refer to the ‘corporate
scandals of six years ago’ and that we do not hear the E and W words quite as
regularly as we do at the moment.
The simple message for accountants and commentators is that it is time to
move on and face the business challenges of the 21st century.