The destruction of the World Trade Centre ignited unprecedented levels of political, military, economic and social action, the results of which won’t be revealed for years, fuelling the global business community’s uncertainty about the future.
Even before last week’s tragedy, employment, production and business spending remained weak. Now, it is anticipated that America’s Q3 gross domestic product will contract; short-term interest rates will be lower around the world; and financial markets will be increasingly explosive.
Investment banks have been experiencing the worst slowdown for nearly a decade; the number of mergers and acquisitions was fewer than last year due to falling equity markets and the economic slowdown, leading to a 50% plus drop in deal volume for the first half of 2001. Investment bankers currently anticipate even fewer deals as share prices become more erratic due to increased market uncertainty, allied with restrained trading activity over the next few months while investors exercise caution. Companies are cancelling acquisitions and are re-examining plans to float, expand or sell. It is currently assumed that the situation will probably deteriorate until the broader crisis is resolved.
The British travel and tourism industry, already reeling from flooding and FMD, is now under siege, while many sub-sectors of the ailing manufacturing industry could hit the wall. Other sectors will experience a decline as the economic slowdown, consumer uncertainty and political developments converge to create unstable market conditions.
While the immediate effect on the UK’s accountancy profession might seem negligible, this could change dramatically in the medium and long term.
Now is the time for the accountancy profession to rise to the challenge and do our utmost to become beacons of inspiration, creating confidence in the City, in British business and in the profession. Accountants in practice must encourage their clients to take positive action which will reap commercial rewards – not to adopt a bunker mentality. Accountants in industry must inspire their colleagues to financial boldness, not fear.
We purport to be chartered accountants and business advisers; now, the emphasis must rest on the latter role as British businesses and financial institutions struggle back to normalcy in the face of tragedy and a flagging economy.
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