Argyll Scott recently hosted a discussion between senior Finance Leaders from a diversity of sectors about the key trends seen in 2016 and their predictions for 2017. An interesting conversation was had so we thought we’d share some of the points raised.
2016 was the year of Brexit. Whilst there were many predictions surrounding the impact of the vote, there was much that was overlooked. The devaluing of the pound sterling post the referendum back in the summer of 2016 had an effect on migrant workers which had not been widely anticipated pre Brexit. With the weaker pound converting into fewer euros to send home, a significant percentage of migrant European workers working in unskilled and junior positions went home in the summer and did not come back. The attraction of working and living in the UK lay in the strength of the pound sterling and consequently the amount of money that workers could earn and send home. The opportunity to earn significantly more than they could back home made the lower quality of life in the UK worthwhile. However, when the currency lost value, it meant that earnings were no longer significantly higher than the wages workers could earn back home. Consequently the value of slogging it out in the UK was diminished. Compounding this, an underlying anti-migrant sentiment stirred up by some post the Brexit vote left many migrants feeling unwelcome, unwanted and insecure about their future in the UK. This has had a noticeable impact on the low skilled and junior workforce in some sectors.
At the senior end of the labour market, Brexit led professionals to start questioning whether London is the right place to be for their careers or whether they should relocate to New York or elsewhere. During 2017, companies are going to have to work hard to reassure their senior talent that London is still the place to be versus the rest of the world. That said, London may benefit, at least in the short term, from the fact that elections across Europe take place in 2017 and these are set to cause as much turmoil as Trump’s election win in the US and the Brexit vote in the UK.
A common theme, also raised by our Technology Influencers, currently challenging employers is the attitude of Generation Snowflake towards work. There is general agreement that this generation has a certain apathy towards work and study which is unprecedented. They are less willing to knuckle down, work hard and give long term commitment compared to previous generations resulting in lower productivity and higher staff churn. Sadly it seems that this is particularly the case for young Britons who have attended UK Universities. Young foreign recruits who have studied overseas have a markedly better attitude. Against a backdrop of the unknown outcome of Brexit, a weaker pound, reduced numbers of migrant workers, unsettled senior talent, an apathetic generation snowflake is a further unwanted headache for companies looking to remain in the UK. Employers would like to see UK schools and universities launch new initiatives to tackle this emerging issue and address new graduates’ employability and work ethics.
A key focus for Accounting & Finance teams in 2017 will be on identifying cost savings. There will be greater demand for the application of better data analysis to facilitate decision making and drive greater productivity. In line with this focus, CIMA and ACCA qualifications are increasing preferred over the ACA. Professionals who have gained practical “real life” experience whilst training are deemed to bring more to the table as they skill up earlier in their careers than the ACA qualified accountant.
This change in focus on cost evaluation away from increasing revenue generation poses a certain PR challenge to finance leaders. Traditionally finance professionals have enjoyed the perceived positive focus on revenue creation rather than cost analysis with its potentially negative connotations. Financial leaders and recruiters have to find the positive spin on cost evaluation to change perceptions amongst finance professionals. The new “cool” has to a responsible and holistic approach which assesses waste reduction, costs, efficiencies and productivity in order to drive sustainable profitability rather than a blinkered, single-minded concentration on revenue augmentation. Acknowledgment, appreciation and reward for those that deliver high level commercial analysis will certainly assist in changing mindsets.
Indeed whilst on one hand, companies are demanding greater levels of commercial acumen from their finance teams, there is a concern, on the other hand, that they are failing to recognise or acknowledge the value of the contribution that their increasingly commercially astute finance teams. With a limited talent pool available who have the increasing sought after commercial and analytical skills and experience, it is agreed that competitive advantage will quickly be gained by those insightful early adopter companies who do not delay investment in their finance teams.
Nevertheless, there is much that finance teams can do to help themselves by demonstrating the power and value of analysing big data and harnessing analytic tools to drive change and increase profitability in order to justify the costs of doing so. In part, the answer lies in visualising the output of their analysis in a meaningful and compelling manner. Analysing and interpreting the data is essential but it is equally important for finance teams to present their findings in a way that enables the rest of the board/decision makers to digest and apply the data easily and rapidly to their decision making process. Inevitably, as finance teams become more sophisticated in their data presentation and the fruits of their labours emerge, the case for further investment will be compelling.
On a totally separate note, a recent challenge facing business leaders in consumer markets is the emerging trend of “pop up” entrants in large volumes across the sector. Critically, this is putting pressure on older brands who do not invest in their brands. Old, tired brands cannot rely on long term consumer loyalty. More than ever before, they need to invest constantly in maintaining their appeal, relevance and consumer communications as their market place becomes more crowded, noisier and omnichannel. As a result of being spoilt for choice and permanently distracted by new offering, consumers are progressively more fickle. The retail and consumer market is tough and investment in brand and consumer insight is going to be increasing important for survival.
Other issues currently on the agenda for finance leaders include the debate over offshoring vs near shoring or onshoring of transactional activity. Increasingly, those companies who have trialled near or onshoring of their transactional operations have benefitted from better control. As a result, with Eastern Europe and regional locations offering low cost options, there is an increased preference for near/onshoring.
Despite recent media hype, there is little appetite for companies to consider a hurried relocation out of the UK post Brexit due to the numerous practical issues associated with such a move including office space and costs, talent retention and availability and infrastructure implications. All this is enough to deter most finance leaders from rushing into such moves, at least until we know what Brexit actually means for UK based companies. Greater priority is being given to the retention and engagement of foreign talent whilst we wait for the UK government to negotiate its terms of exit from the EU. The burning question being asked is how do we maintain the reputation of the UK as the place to be? 2017 needs to be a positive and reassuring year for the UK.
Finally, but by no means least, it is predicted that we’re going to hit a “wall of costs” come Spring 2017 as business rates rise, living wage increases kick in and companies who hedged their FX exposure until March/April start to feel the effects of the changing value of the pound sterling against the US dollar and euro in import costs. This undesired April crunch is going to force companies to start passing on costs to the consumer, which will, undoubtedly, impact consumer spending and confidence levels.
So, are you prepared for 2017? It looks set to be an interesting ride.
If you would like to find out more about future Finance Leader events, please contact Andrew Dallas on 020 7936 1105 or at firstname.lastname@example.org or Lorna Maltby on 020 7936 1144 or at email@example.com.