What are the biggest issues you face in 2002?
John Coombe, FD, GlaxoSmithKline
: Helping to drive continuous improvement in the post-merger GSK. Working through the ASB to deliver clarity on the International Accounting Standards to be introduced in the UK by 2005. Making sure e-business is only used when demanded by the business rather than when thrust upon us by the ‘e-xperts’. And putting the Christmas lights away carefully so they stand a chance of working again in 2002.
George Watt, FD, Scottish Media Group: Helping ensure SMG’s voice is heard in the debate on changes in UK media ownership legislation and dealing with the impact of those changes and the effects they may have on strategy.
Simon Laffin, FD, Safeway: Driving returns from our investment programme. Also explaining daft new accounting rules.
Martin Jackson, FD, Friends Provident: Managing business at a time when consumer confidence may be low.
Ron Turnbull, FD, Pubmaster: Driving organic growth through supporting our licencees to improve the quality of our pubs and enhance profits. I believe that the industry will continue to consolidate resulting in a handful of organisations running large pub estates and our issue is to ensure Pubmaster is one of them. On a general level though, we and our licencees will continue to suffer from the costly effects of the ever increasing mountain of red tape.
Stacey Cartwright, FD, Egg: We are making the rewarding transition from a loss making start-up (2001 and prior) to a profitable growing UK business (2002 onwards). In 2002, we’ll be looking to build UK profitability through the year while simultaneously launching Egg outside the UK.
John Edwards, FD, BNFL: Restructuring the balance sheet post agreement on strategy with the shareholder (the Department of Trade and Industry).
Do you expect the UK to go into recession in 2002? Or will we avoid it?
Coombe: I believe we will avoid it, so long as the Chancellor doesn’t raise taxes to fund ambitious spending plans we cannot afford.
Watt: I think overall the economy will avoid recession, just. However, I think certain sectors will be less affected than others, with consumer facing businesses least impacted.
Laffin: No. But it may be a very close thing.
Jackson: It will be touch and go. Either way, the short-term economic outlook is weak.
Turnbull: Some UK sectors are already in recession, although retail and services continue to perform above expectations. Can the enthusiasm demonstrated by current levels of consumer spending be maintained? I suspect not. With the most recent inflation statistics well below the government’s target, I expect interest rates to rise by the end of 2002 and with job forecasts gloomy, I think we may find ourselves approaching a mild recession.
Cartwright: I expect the slowdown to continue but this country is likely to fare better than virtually all other Western economies.
Edwards: I expect the UK to go into recession but recover in early 2003.
Euro notes and coins arrive on 1 January 2002. Spectacular fireworks for European business or a damp squib? Why?
Coombe: A lot of media interest in January with interminable interviews with people who say they don’t understand the new notes and coins. Then a damp squib – a non-event in the medium term. The interesting question is how long will it be before a country blames the euro for its failure to deliver electorate-pleasing policies.
Watt: Probably somewhere in the middle and dependant on how much cross-border trade a business transacts. You can never have everyone happy with changes such as this, but it has been well trailed and the eurozone should see benefits from price transparency.
Laffin: It will have very little impact in this country.
Jackson: It will inevitably bring changes on the business front but will have little impact on Friends Provident.
Turnbull: The introduction of the euro will have little direct impact on our business but retail outlets that are largely dependent on cross-Channel business will need to make adjustments to accommodate the new notes and coins. I have no strong views at this point in time one way or the other, but I would like to see some hard evidence from the government as to the real pros and cons of pursuing a euro strategy in the UK.
Cartwright: It has been a long time coming, and I suspect it’ll be like year 2000 preparations – you’ll wonder afterwards what all the fuss was about.
Edwards: Absolute damp squib. The UK trades on a global basis, not just with Europe, and the USA is still the major player. Link the euro to the US dollar and things would be different.
What will the single biggest impact be on your business in the wake of 11 September?
Coombe: That with the provision of drugs and vaccines our industry is seen as one that can help and wants to help in the face of bio-terrorism. Also that we all realise we can do our jobs with a lot less travel. We and our families gain from less stress and strain and the company gains from lower costs and less stressed staff.
Watt: The impact the events have on sentiment in the advertising market and the economy in general. But they are apparently less than at first feared, and I think the worst effects are already being shaken off.
Laffin: Insurance companies rebuilding their margins.
Jackson: Fragility of the world’s stock markets.
Turnbull: As our business comprises predominantly community-based pubs, we are no where near as susceptible to the adverse impact these tragic events have had on the hotel, travel and tourist industries. Traditionally, our industry has been able to weather such circumstances and I expect us to continue to do so – but it will be tough.
Cartwright: Our biggest area of sensitivity is credit quality and potential bad debts. This has been in the spotlight to an even greater extent since 11 September and the heightened fears of recession. To date, our relatively upmarket customer base has meant we’ve had good credit experience and this has continued post 11 September.
Edwards: Insurance premiums will rise due to concerns about terrorist attacks on nuclear facilities.
What advice do you have for fellow FDs in 2002?
Coombe: Enjoy your job – it’s not worth doing otherwise. And enjoy your rewards, too – you can’t take them with you.
Watt: You should keep both eyes on the cost base.
Laffin: Grow profit only through superior sales performance.
Jackson: Watch out for opportunities but concentrate on managing risks.
Turnbull: No doubt we will all be paying close attention to costs, but equally important is the emphasis which should always be placed on controls and best practice.
Cartwright: The only certainty for 2002 is life won’t turn out exactly per your business plan. Stay nimble and flexible and ready to respond to changing circumstances.
Edwards: Keep your head down. Watch the cash and plan for 2003.