A new survey shows that heads of corporate finance are taking a gloomy view until at least next year, while their top concern is cost control. At the same time a number of companies are considering moving abroad citing corporation tax as their main irritant.
The credit crunch is set to go on until the second half of 2009 at least, and the UK economy is heading for recession if it is not there already. That is the gloomy view of finance directors in the annual poll of FDs carried out by CA Magazine, the journal of The Institute of Chartered Accountants of Scotland.
The survey was carried out amongst nearly 200 finance directors, all members of ICAS ("CAs"), representing companies of all sizes in Scotland and throughout the rest of the UK. They range from businesses with turnover of less than £1m to plcs with turnover of more than £1 billion, as well as FDs in public sector and not for profit organisations. One in three of those polled oversees a turnover of £100m-plus.
More than a fifth of those polled (22.5%) believe the UK is already in recession and 42.5% believe that a recession this year is "very likely". Only just over 6% believe recession is "not likely".
Almost no respondents (1.3%) expect the liquidity crisis or "credit crunch" to ease by the end of this year and only 13.1% see this happening in the first half of 2009. More than half (51.3%) expect the crunch to end in the second half of next year and a pessimistic 30.6 per cent fear that it will go on into 2010 and beyond. Scottish-based finance directors were the most optimistic, with 15.7% anticipating the crunch to end in the first half of 2009. The most pessimistic were FDs at Stock Exchange-listed companies: half of them expect the shortage of finance to go on well into 2010 or even later.
The "top 10 challenges" for the FDs in the survey are:
The rankings of the "top three" challenges have remained constant over the past few years, and "staff recruitment and retention" has not reduced in importance, despite the economic downturn.
The survey also found that 8% of the UK-based FDs had considered relocating their organisation to another country and just over 1% had actually done so. For listed companies, these figures went up to 16.1% (considered or considering) and 6.5% (actually relocated). For those considering a move away from the UK, the three chief reasons were: first, "the level of UK corporate tax"; second, "regulatory environment" and third, "availability of skills".