Euro spells job cuts for accountants

Rather than cheering the birth of the euro at the beginning of the year, accountants around Europe should perhaps have been contemplating life on the dole.

Companies as big as car giant BMW have already admitted they will be centralising their Europe-wide finance functions, as a direct result of the introduction of the single currency.

It is a pattern expected to be repeated by companies across the continent.

Now the introductory fanfare is out of the way, international companies can get down to the nitty-gritty of reorganising their businesses to put in place the cost savings the single currency is expected to bring.

Tasks such as currency hedging and conversion have disappeared. And experts now predict that the birth of the euro could encourage multi-nationals to simply close down accounting departments in countries around Europe.

Rather than having an accounting function in each of the 11 Euroland countries, a multinational may decide it only needs one or two finance departments serving the whole of Euroland.

BMW is among those considering such a move. It says the euro will allow it to rationalise some of its accounting functions and centralise them at its Frankfurt headquarters.

A spokesman says: ‘The euro will make things easier in the future because you can centralise cash clearing and you will not have to have finance departments in every country.’

He adds: ‘There are also some other functions that could be centralised because we will no longer need to hedge currencies within EMU.’

But the spokesman denies this will necessarily lead to job losses, although he does not rule them out, saying instead that plans are still at an early stage.

Another German car giant, Daimler-Chrysler, which makes Mercedes-Benz, says it expects to save DM100m a year as a result of the euro. It says a significant proportion of the savings will come from a reduction in transaction costs. A spokeswoman says: ‘The accounting department will have fewer things to do.’

Again, she denies this will lead to job losses, saying those affected will be given other things to do.

Yet Rory Colfer, a consultant in KPMG’s EMU unit, says job losses among European accounting staff are inevitable, and that accountants in the UK may also suffer job losses.

‘There is no doubt the number of accounting departments around Europe will decrease dramatically,’ he says. ‘The typical multinational wants to reduce the number of accounting departments it has. The old model of ten accounting departments around Europe will no longer exist.’

Colfer warns that, in the short term, multinational companies may move from having ten accounting departments across Europe to having one for northern Europe and one for southern Europe.

‘The number of finance staff required will diminish alongside the single currency and the development of the shared services concept,’ he says.

The shared services concept – where an international company decides to concentrate all its back-office functions in one place – is likely to reign, according to Colfer. Popular locations include Ireland, the UK and Spain because they are cheaper and good government incentives are available. The Netherlands is also popular because of the multilinguistic talents of the Dutch.

He says the UK will remain a competitive location despite staying out of the euro, although the decision to retain sterling may influence the decisions of some multi-nationals when deciding where to locate their finance centres.

Colfer says it is accountants lower down the management chain who will be worst affected by the changes, and that senior accountants involved in planning and strategy are likely to be less affected.

His advice to those accountants who are involved in transaction processing and the assembling of data is to diversify their skills.

But lessons from other similarly sized trading blocs that employ a single currency might offer some hope.

Peter Blackie, the European Commission accountant responsible for disseminating information from DGII, the directorate for economic and financial affairs, plays down the profession’s fears.

‘Some would argue that when you have greater financial stability, you don’t need so many chartered accountants to look at what’s happening and you can take measures less often, leading to a reduction in the use of accountancy and derivative products,’ he says. ‘But in the US they use more of both and they have a single currency – the dollar.’

Blackie says that companies in the euro zone will be more active in seeking to raise money through cross-border bond issues and stock market listings.

Trends in government finance also mean more European citizens will put savings away towards pensions.

‘Both those elements will need a higher standard in accounting practice,’ says Blackie. ‘We’re already seeing that in the French and German stock exchanges and the clamour for international accounting standards. That can only mean higher auditing standards and a need for more auditors.’

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