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By Sarah Hathaway, head of ACCA UK

We teamed up with the New Statesman to discuss this subject matter at the three party conferences – see a link to the report at the bottom of this blog, but here is my takeaway.

I think you would be hard pressed to find someone who does not think business cares about politics; politicians set the framework in which business operates, a working relationship is paramount. But do politicians care about business; does it only care about a certain type of business? This was the broader theme for the discussion.

The last few years have been difficult; the pressure on the public purse was always going to lead to trade-offs and some issues taking prevalence. And our members support austerity (mild or severe) if imposed at the right pace.

However if recovery is to continue, access to finance is key. As an organisation that supports members from small to large businesses, we recognise that their needs are distinct but that they are also intertwined; businesses do not operate in silos, they are party of a larger supply chain. We are keen to push all three of the parties to continue to champion alternative forms of finance and access to it. We know from our members that this is crucial and the small business bill has taken steps to improve this. There is some evidence that all parties recognise the importance of it but it’s about making sure the practical regulation works for business.

The issue of Europe was unsurprisingly part of the debate at Conservatives; as a global organisation we recognise the need for stability, that’s what our members want and that’s what is needed for businesses to attract long-term sustainable investment. Why would we cut ties with our biggest trading partner? That’s not to say reform isn’t needed, but reform from within not from the outside.

Of course discussing Europe involves a debate around immigration; that debate must be an honest one. We have a skills gap and so while we are working to plug that over the medium-term, we still need to fill it in the short-term. We believe all parties need to recognise that and taking students out of the net migration figure and treating them as a talent pipeline for business will help achieve that.

Ultimately politics involves trade-offs and risks, much in the way business does, but it is about calculated risk, evidence and taking a long-term view.

Politics is at its best when it recognises that it doesn’t have all the answers and that it shouldn’t try to. Instead as with any good relationship, the success comes through hard work, collaboration and concession on both sides.

To download a copy of the report click here.


Ian Murray MP

By Ian Murray MP, Shadow Minister for Trade and Investment

Improving trade will be vitally important to growing the UK in the coming decade. Indeed, boosting exports must be a national mission. The current Government has also recognised that and have set an ambitious target to increase exports to £1 trillion by 2020. However, there are concerns that the pace at which exports are expanding isn’t fast enough.

The headline news from the Office for National Statistics is that the monthly trade deficit in February narrowed, down to £2.1bn from the £2.2bn in January. The value of goods exports was the lowest since October 2010, while the goods deficit excluding oil and items such as precious stones and aircraft – widened from £8bn to £8.5bn.

For these statistics to improve, Labour believe that Britain’s small and medium-sized businesses will be crucial to driving our exports and we are looking at ways we can support them to do that.

Ensuring that firms have access to the finance they need to export is a crucial. That is why the Government’s two flagship export schemes – the £5bn Export Refinancing Scheme and the £1.5bn Direct Lending Scheme – need to start lending and I would encourage ministers to look urgently at the performance of these schemes.

The UK needs to get more businesses exporting to boost middle-income jobs and grow our way out of the cost-of-living crisis and so we can ensure Britain can compete in growing global markets. We have fantastic, innovative businesses, and many important advantages on which to build up our exports. We have a strong British brand, our language, our legal system, and even our time-zone work in our favour. We should be drawing on the rich cultural tapestry of Britain, building on the links with our Disapora communities to strengthen trade links with emerging markets, and building city-to-city links as Chuka Umunna the Shadow Business Secretary outlined last week. To grasp the opportunities and exploit our full potential needs a Government that is prepared to act and prepared to support.

If this does not happen we will not only miss being ahead of the game and fail to grasp the opportunities with regard to exports to the BRIC economies, the ship will sail on the new wave of fast growing economies – the Next Eleven, including the recently much publicised MINT (Mexico, Indonesia, Nigeria and Turkey) countries.  Ministers must do much more than offer warm words.

As April’s Western Union International Trade Monitor has shown, only 9% of SMEs have customers in China compared to 15% a year ago, whilst only 6% sell to India (vs. 14% in Q1 2013). Indeed, the percentage of SMEs planning to expand into emerging markets fell from 36% in Q4 2013 to 28%. That’s not good enough. These are exactly the markets that UK businesses should be breaking into, but they can only do this with the support of an active government which utilises its export guarantees, a future Labour Government would be as active as possible.

The next Labour government will make it a central mission to boost exports, innovation and investment as part of Agenda 2030, which is our plan for better-balanced, sustainable growth. This means engaging with our European partners using our membership of the EU to reform it and to help us as we look to boost our exports in new markets overseas and help more small firms export. The UK mustn’t head for the EU exit door, an approach which would do nothing for jobs and the ability of smaller and medium sized businesses to export.

Our Small Business Taskforce has made a number of recommendations to Labour which we are examining. These include creating export hubs in major world cities to give UK firms a foothold; export “rainmakers” who can help small businesses identify and approach potential customers; and a suite of export finance products comparable to those offered by the US Small Business Administration.

As a former small business owner, I know the importance of having a government which supports business and steps up not steps away. We have businesses across the country that have huge ambition. It needs to be matched with a government prepared to act.

Gillian Fawcett-8525

By Gillian Fawcett, head of public sector, ACCA

The consequences of the 2008 financial crisis continue to play out and have led governments across the globe to reassess the delivery of public services in an age of prolonged austerity.

However, the outlook in the accountancy sector remains positive with developments showing that the profession is coming up with innovative solutions to meet the needs of public financial management.

ACCA’s recent paper Breaking out: public audit in a post-crash world shows that efforts are being put forth by numerous governments around the world to address the challenges surrounding public audit.

Contributors from Scotland to Bhutan, Australia to Jamaica, offer their perspectives on what has worked, what could be improved and what should be considered in this important area going forward.

The reports’ contributors highlighted certain areas of best practice and different approaches such as in Canada, where chief audit executives are now required to hold an internal audit designation. They also have a direct and exclusive reporting relationship with the deputy minister in their department. This change, quite early on, demonstrates the strategic role accountants are playing.

All the essays highlighted the importance of early intervention in saving money on big projects, particularly where governments outsource public services. Important lessons can, and should be, learnt from the crisis; there was clearly a systemic failure in both the private sector and the public sector to properly account for risk, and more must be done to account for this in the future.

All the contributors were in agreement that better financial reporting and risk management results in better decision making.

ACCA will be hosting a roundtable discussion at the end of April to look at these issues. Being held at the Palace of Westminster, the event will feature participation from the Rt. Hon Margaret Hodge MP, who will offer her insights about what Government should be doing to ensure public finances are not only properly managed, but that the right systems are in place to avoid costly mistakes.

Some of the key questions to be considered at the event will include: Are short-term cost saving exercises storing up long-term failures in accountability? Is there a case for auditors to be involved much earlier on in significant public procurement projects, particularly when considering the National Audit Office estimates the UK central government spends £40bn with third parties, if so what needs to change? Should private companies undergo the same audit rigor as their public sector counterparts? And, considering the increasing fragmentation of public service delivery, are there enough checks and balances in the system for parliament to follow the money?

Radical change is taking place across the UK government and public sector. In part it is being driven by the need to recover the public finances, an objective shared by all major political parties. As spending is set to fall by more than one fifth in real terms from 2009/10 to 2017/18, we must ensure resources are allocated to scrutiny. The government must take bold decisions about where to allocate funding therefore, resources for proper scrutiny must be a priority.

What this publication demonstrates is that despite the varying systems, there is a DNA which runs through all parliamentary public account committees and audit systems.

Five years on from the crash, there are positive conversations about how we can achieve more with less.

Emmanouil (Manos) Schizas

By Manos Schizas, senior economic analyst, ACCA

Late payment is, as I’ve written before (here and here), a significant problem for small businesses in the UK, indeed in many of ACCA’s major markets. For years successive UK governments have chiselled away at the problem with an array of tools but made relatively little progress.

Hence, it was encouraging to hear that the UK government is consulting on ways of reducing the incidence of late payment to SMEs. The government, we are told, will ask for views on (among other things):

  • How it can encourage greater responsibility for payment policies at senior management and board level
  • How it can make clear which firms are good payers and which aren’t
  • Whether there is a case for further legislation or penalties for firms which pay late.

Aren’t we forgetting something?

ACCA agrees with the PM that it is important that the Government signal in very clear terms that prompt payment is a significant element of corporate citizenship. Until last month, one of the ways it did so was to require that companies provide information on their record of prompt payment to suppliers.

I say ‘until last month’ because the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013, which came into effect on 1 October, effectively scrapped this obligation; a change that has been two years in the making.

In September 2011, the UK Government launched a consultation on the future of narrative reporting in the UK. One of the proposals, inspired by a commitment to regulatory reform, was to scrap the prompt payment reporting requirement. BIS’ laconic justification reads as follows:

“Successive governments have attached a great deal of importance to prompt payment to creditors by business. However, we understand that the information this requirement provides is not considered useful for either creditors or shareholders so are removing this requirement.”

Now, I don’t doubt the outcome of the consultation was as reported by BIS. I’ve seen for myself responses from other influential stakeholders that ‘warmly welcome’ the removal of such ‘superfluous’ disclosures. I can say, however, that ACCA certainly did not share the majority view. In our response to the consultation, we argued that

Companies should continue to be subject to a requirement to disclose their policies and practices on payment of creditors. […] We would agree that the existing disclosure requirement does not appear to have impacted on the prevalence of the problem. But the ineffectiveness of the disclosure requirement can […] be attributed at least in part to the ease with which figures can be smoothed and to the absence of any sanction for non-disclosure. If the current requirement were to be removed, this would we fear send an unwelcome signal to companies that late payment is no longer seen as an important issue of public policy. […] Rather than abolish the disclosure requirement, therefore, it would be better to revisit the current requirement and refocus it so as to require the disclosure of more meaningful information.

Useful in principle

Long payment terms and late payment are, at the end of the day, cheap ways of ensuring liquidity. Investors, creditors, even a company’s own staff may benefit from them. But they may also want to know how much liquidity the company can draw on in this way; the amount is not infinite, and for a business plan to assume it is, is a major risk. It’s a matter of understanding the business model and its vulnerabilities. In a credit crunch, even small suppliers will become stricter creditors, as ACCA and CBI research has demonstrated. Some could fail altogether. An over-reliance on informal liquidity for the actual financing of the business could, in fact, signal trouble ahead.

Moreover, investors, creditors and other stakeholders might well want to know whether the company’s bargaining power vis-a-vis suppliers is endangered by its payment policies. If the company is forcing its suppliers to underperform in the long term, they could refuse to do business with it in future. Alternatively, they or their assets could end up being acquired by their competitors. Either way, the remaining suppliers’ bargaining power would increase substantially, eating into the company’s profits. Why would anyone not want to know about this risk? Again, it’s a matter of assessing the viability of the business model.

The fact that a rather poor tool for delivering this valuable information did not seem to work does not mean stakeholders should forever give up on the information itself. This is a running theme whenever narrative reporting is discussed, and the solution is pursuing more integrated reporting, not giving up altogether.

I hope the UK Government’s consultation will provide an opportunity to reopen the discussion on this basis.

(l-r): Sarah Hathaway, head of ACCA UK; Sir David Wallace, master at Churchill College, Cambridge; Timothy Luke, Prime Minister's senior adviser for business; David Cameron, UK Prime Minister; Professor Sir Martin Sweeting, executive chairman of Surrey Satellite Technology; Martin Donaldson, chief executive of the British Council

(l-r): Sarah Hathaway, head of ACCA UK; Sir David Wallace, master at Churchill College, Cambridge; Timothy Luke, Prime Minister’s senior adviser for business; David Cameron, UK Prime Minister; Professor Sir Martin Sweeting, executive chairman of Surrey Satellite Technology; Martin Donaldson, chief executive of the British Council

by Sarah Hathaway, head of ACCA UK  

There was a great deal of fanfare about David Cameron being the first British Prime Minister to visit Kazakhstan at the end of June and judging by the £700m worth of deals with British businesses that came from that visit alone, it was worth all the fuss.

BG Group, Rolls Royce, other business representatives and those from UK universities all flew out to the Central Asian market to meet with business leaders, policy makers and other stakeholders to discuss ways the UK and Kazakhstan can work together.

It is no surprise that where UK businesses look to develop links in emerging economies, finance professionals are there in readiness to support not only cross-border deals, but also the businesses within emerging markets, which is why ACCA UK was invited by UK Trade & Investment to join the PM and Trade & Investment Minister Lord Green on the visit to Kazakhstan.

ACCA was the only accountancy body on the visit, and I was honoured to be the organisation’s representative on the visit. We not only have an established presence in the Central Asian country, as well as 1,604 ACCA students there, we are also a genuinely global body. Of course I would say that and our PR team would be proud of me for plugging those key points, but these are genuinely valuable assets that are key to emerging markets such as Kazakhstan.

Kazakhstan is a young country, just 20 years old, but is rapidly developing and has strong industries – oil, mining, pharmaceuticals and financial services to name a few. The republic’s President, Nursultan Nazarbayev, has high ambitions for the economy, keen to give it a truly international presence. That’s where finance professionals have a key role to play.

It’s one thing to have strong mining and oil sectors, but taking them global requires finance talent to help that happen. The international focus of UK finance expertise is essential for Kazakhstan to not only cement ties with UK businesses but to reach out on a more global scale.

Having that complete finance knowledge in the board room will increase the levels of corporate governance and sends a clear signal to investors that Kazakhstan is not only open for business but that it has the finance experience supporting its industries. With growing adoption of IFRS there is arguably a greater need for rapidly developing markets to look to us for skills. It is no coincidence that the Managing Director of Samruk Kazyna, Kazakhstan’s sovereign wealth fund is Peter Howes, a UK finance professional.

From a UK point of view, British businesses are already benefiting from closer trade links with Kazakhstan, but there is scope to go further. There is a need there for experienced finance professionals to boost Kazakh and UK companies doing business with each other.

However, we shouldn’t look at this solely from a short-term view point. Yes, ACCA UK and its members can play a key role in helping Kazakh and UK companies doing business with the republic hone the finance function and handle the constantly changing regulations in the country – ACCA members’ management skills are critical to that end. Longer term, however, ACCA has a bigger role to play.

The ethos behind ACCA’s accountancy qualifications is that home grown talent can emerge and lead a market’s own finance profession. It will take time for Kazakhstan’s finance expertise to transform into chief finance officers with the complete, global management skills required to take businesses in the region onto a surer international footing, but over time they will emerge, which is why ACCA is there already.

Our global experience, internationally recognised accountancy qualification and established presence in Kazakhstan means we are well-placed to support the country as it develops the next generation of finance talent from within.

The fact we are there, along with Ernst & Young and other global accountants, also means that tomorrow’s CFO’s can learn and benefit from working with the current crop of the world’s finance leaders and nurture links with their UK counterparts. As well as being a trading partner for UK plc Kazakhstan can be a finance profession partner into the future as well.

There is another benefit to us being there. ACCA UK represents accountants in the UK, irrespective of size. Many of our members’ clients are small and medium sized enterprises who could hugely benefit from exports to emerging economies. What’s to stop a small business specialising in valves in Yorkshire exporting to Kazakhstan’s expanding oil industry? It can be daunting, but our members are there to help those business meander their way through the red tape of exporting, and with ACCA UK securing closer ties in Kazakhstan and the wider Central Asian region the scene is set for that to happen.

Kazakhstan has a lot going for it, as does the potential relationship it has with UK plc. Finance professionals are there to make it happen.