The Big Question, a survey of 200 financial directors carried out by Accountancy Age and Reed Accountancy Services has revealed concerns of FDs changed dramatically over the last 18 months.
After 75 issues, the questionnaire has grown into an authoritative guide to the real concerns of the UK’s top FDs. Opinions came from FDs representing small companies and multinationals as well as public organisations.
Among concerns for UK business, the rise in interest rates has provoked very different responses from the FDs questioned. In November 1996, increased spending and wage rises pushed underlying inflation from 2.9% to 3.3%, representing the highest rise in three years.
As the business community expected the then chancellor Kenneth Clarke to push up the rate, the Big Question asked: ‘Do you believe that an interest rise is required to cool a potentially overheating economy, or will it be damaging to business?’ A total of 47 % believed the effect would be damaging while 36% considered a rise was what was required.
On 8 May 1998, with the base rate at 7.25%, the question posed was: ‘For the good of your organisation, is it time for interest rates to come down?’ The response was overwhelmingly in favour of a drop: 39% of the 200 FDs surveyed said they would definitely back a reduction.
Les Campbell, FD of manufacturer Unilodge, said: ‘There is a definite need to lower the value of sterling to improve the competitiveness of UK exporters. We are at a distinct disadvantage, particularly in the Far East.’
Another 29% said they would probably back a reduction. Clive Scott, of Cranstoun Drug Services, said a drop would be beneficial, ‘providing rates can be reduced gradually without increasing inflation.’
Strong sterling became an increasing burden on business over the period.
In September 1997, fears that a strong pound might stunt growth were raised, but the problem was still in its infancy.
FDs were asked: ‘Should the government take action to reduce the value of the pound further? In response, 43% were in favour, but a significant 30% were against.
The question was rephrased in April 1998 as: ‘Is the strong pound damaging your business?’ Half of the respondents said the strong pound was damaging business and, of that group, 50% said the effect was significant. Norman Jeffries, FD of freight forwarders A Hartrodt, said: ‘As we are an export business, the strong pound is killing our business.’
Labour’s first year of administration had been less negative than many FDs expected before the election. In May 1998, 28% of FDs said the business environment had improved in Labour’s first year, but 38% said it had not improved.
Reaction to Labour’s first Budget was on a similar par to that towards the Budget in the last Conservative administration. In December 1996, 47% of FDs asked said they felt Kenneth Clarke’s November Budget was a genuine attempt to aid the economy. In July 1997, FDs were asked if chancellor Brown’s Budget was good for their business, 42% said that it had been.
Self-regulation maintained its position as a high-profile issue throughout the period. Quizzed over whether self-regulation should be continued or abolished in favour of an outside independent regulatory body, in July 1997 53% were still in favour of independence but this slipped to 51% by March 1998. But, critically, those in favour of a new regulator rose from 31% to 40% in the same time.
On the matter of European monetary union, the survey produced a staggering lack of preparation from companies represented. In December 1996, 84% of FDs said their companies had not done much preparation for the introduction of the Euro. By April 1998, 62% of FDs complained the present system was too complicated. David Harrison, FD of design company Ahrend, said: ‘The tangled web of EC sales declarations is a bureaucratic barrier to open EC trade.’
Tax self-assessment continued to create headaches for the profession as the enormity of the task became clearer over time. In January 1997, two-thirds of those respondents said their companies were prepared for the additional requirements of self-assessment.
But by May of that year, 57% of those asked said they were behind the idea of an amnesty on penalties for late filing in the first two years of self-assessment.
By October 1997, with 4 million self-assessment returns still outstanding, 48% of those sampled said the Inland Revenue would have to extend its 30 September deadline.
Accountancy Age and Reed Accountancy Personnel have published the first 75 Big Question surveys in book form. If you would like a free copy, write to: The Editor, Accountancy Age, VNU House, 32-34 Broadwick Street, London W1A 2HG, stating your name, address and job title; or fax your request on 0171 316 9250.
Crowe Clark Whitehill , the top 20 accountancy firm, has announced the promotion of Chris Mould to partner
The latest opinions from Accountancy Age on Making Tax Digital, and outline plans to evolve the UK's corporate governance regime
Five million taxpayers are ow using digital personal tax accounts (PTA) as part of the making tax digital strategy, HMRC said
UK-based non-doms have paid ten times more tax than the average taxpayer, raising concerns over the Brexit impact on non-dom contributions and therefore, the economy