Category Archives: Economy

EBA celebrates manufacturing in Europe

This is the first in a series of articles leading up to the European Business Awards Gala Event on 27 May 2014. RSM is the lead sponsor of the European Business Awards, click here for more information on the programme.


This year’s European Business Awards will not only be a celebration of success, but also of variety, as the National Champions and Ruban d’Honneur recipient list is composed of 130 companies from over 20 different sectors across the business spectrum. Upon viewing the list of hopefuls there are a number of sectors which stand out: there are 17 technology companies, ten software firms and ten businesses in the environmental sector. However, by far the most prominent sector across Europe is manufacturing, with 23 businesses making it to the final.

This ties in with the Industrial Structure Report, released by the European Commission in February this year, which highlighted the significance of the manufacturing sector within the European Union. The report noted that manufacturing has a hugely important role in both the recovery and the growth of economies across Europe. Nevertheless, after analysing the performance of EU industrial and service sectors, it concluded:

“Manufacturing sectors have been hit more severely by the crisis than services: manufacturing, as a proportion of economic output, has declined significantly.”

The manufacturing sector is currently going through a very difficult period and the European Business Awards gives us the opportunity to celebrate the manufacturing companies that have bucked the trend of decline across the continent.

Conversely, the same EU report praised the growth of pharmaceuticals within the manufacturing sector, saying:

“The pharmaceuticals sector has experienced sustained growth since the start of the financial crisis.”

In fact, the pharmaceuticals sector is the only EU manufacturing sector that has increased its share of output since 2000. With regards to the European Business Awards, only five of the aforementioned 23 manufacturing companies are pharmaceutical, highlighting the range of businesses that exist in the competition, even within each sector.

With six manufacturing companies from the UK and Greece alone, some countries are pushing the sector forwards more than others. We can use the European Business Awards to share best practises and learn from those who have accomplished great things in trying times. The gala ceremony in Athens at the end of May will not only be a celebration of success and variety, but it will also highlight and recognise those who have experienced growth in difficult circumstances.

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Filed under Economy, Europe, European Business Awards

Business confidence in the Middle East and Africa trailing Europe

Can there be anywhere in the world less confident about its business prospects than Europe right now? Most people would answer that question with an emphatic ‘no’. But, during our recent annual conference in London, we polled the 280 delegates – from all corners of the globe – and got some contrary and interesting views.

36% of RSM members in Europe categorised business confidence in their respective countries as ‘good’ or ‘very good’. Surprisingly, both Africa and the Middle East scored lower than Europe on business confidence, despite many countries in those regions experiencing relatively high levels of economic growth. Just 25% and 22% of accounting professionals respectively in those regions rated business confidence as ‘good’ or ‘very good’.

Needless to say, business confidence is absolutely critical. If businesses do not feel optimistic, they will be reluctant to invest. As we all know, increased capital spending by private businesses will be needed to kick-start growth, but many organisations across Europe are still in cost-cutting mode.

Contrast this with Africa, where many economies are growing strongly. Confidence is relative of course, so it’s entirely possible to be less bullish despite a more favourable economic reality. The fortunes of African economies are closely tied to demand from the U.S., Europe and China, but with demand muted, and commodity prices falling, many African economies are facing growing headwinds.

Within Europe the picture is polarised. Whilst 62% of delegates from RSM Germany rated confidence as ‘good’ or ‘very good’, business confidence from UK delegates is significantly below the European average, with only the Spanish more pessimistic about their economic prospects among major European economies. Just 9% of RSM delegates from the UK ranked business confidence as either ‘good’ or ‘very good’, whereas RSM members from Spain are the most pessimistic among the five major European economies, with none rating business confidence as ‘good’ or ‘very good’.

70% of RSM members in the Americas and 66% in Asia/Asia Pacific rated business confidence as ‘good’ or ‘very good’. It’s a little surprising to see confidence in the Americas higher than Asia, but then Americans are known for their optimism, and with the prospect of energy self-sufficiency in the U.S. a growing possibility, there is good reason for feeling positive. Energy is one of the largest input costs for manufacturing businesses, so the shale gas boom could provide a much-needed competitive boost to U.S. industry.

Looking forward to 2013, 42% of RSM members in Europe think business confidence will decline over the next 12 months. Only African RSM members are less optimistic: just 25% thought confidence would improve, compared to 36% of Europeans.

RSM members have their fingers directly on the pulse of businesses in their respective countries, so this survey provides a fascinating overview of economic vitality. 2012 has been a tough year for the global economy, but there is reason to hope that the prognosis for 2013 will be a little better.

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Filed under Africa, Asia Pacific, Business confidence, Economy, Europe, General, Latin America, Middle East and North Africa, North America

Accountancy at the heart of global competitiveness

The World Economic Forum (the organisers of Davos) has issued its latest Global Competitiveness Report. This is a fascinating insight into the health of economies beyond simply GDP, and the largest study of its kind. You can read the full report here.

Most interesting are the insights into productivity and prosperity, and how they differ between nations.

The challenge facing most policymakers is navigating the short term turmoil while trying to establish the fundamentals that underpin economic growth and development for the longer term.

While policymakers around the world remain concerned about high unemployment and the social conditions in their countries, the key call to action by the WEF is for countries to focus on raising productivity.

The report adds…

“Sustained structural reforms aimed at enhancing competitiveness will be necessary for countries to stabilize economic growth and ensure the rising prosperity of their populations going into the future. Competitive economies drive productivity enhancements that support high incomes by ensuring that the mechanisms enabling solid economic performance are in place.”

The WEF defines competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country.

The WEF concludes by explaining the 12-pillars of competitiveness – the structural economic foundations for growth. You can read them beginning on page 2 of the report. The first of the 12-pillars is the legal and administrative framework which underpins the financial system.

My eye was drawn immediately to this quote:

“The recent global financial crisis, along with numerous corporate scandals, have highlighted the relevance of accounting and reporting standards and transparency for preventing fraud and mismanagement, ensuring good governance, and maintaining investor and consumer confidence. An economy is well served by businesses that are run honestly, where managers abide by strong ethical practices in their dealings with the government, other firms, and the public at large. Private-sector transparency is indispensable to business, and can be brought about through the use of standards as well as auditing and accounting practices that ensure access to information in a timely manner.”

Clearly we have a tremendous responsibility as an industry and we need to continually adapt and evolve our practices to meet the demands of a complex economic environment.

RSM’s work to support the EU commission in its proposed reform of the audit market is just this. We are at the cutting edge of creating a fairer, more balanced and more competitive industry for the benefit of companies, investors and economies alike. You can read more here.

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Filed under Audit Proposals, Economy, EU, Sustainability

Seeking an economic legacy for London 2012

The 2010 World Cup revived South Africa’s image, Euro 2012 recently showcased Poland and Ukraine and the 2016 Games are expected to mark Brazil’s arrival as a major world player. ‘Mega events’ clearly offer benefits to developing economies, from improved infrastructure to consumer and tourist confidence, but what about the developed world? The gains are different – it’s about urban regeneration and redefining established cities in an increasingly competitive world market; the potential margin for positive change is significant but, arguably, smaller.

The 2004 Athens games exceeded its budget by five times and was seen by many as the harbinger of the country’s financial turmoil; the Summer 1976 Olympics in Montreal left the city in debt for thirty years. LA in 1984 generated a $335m profit, that continues to fund sports projects in California to this day, but it was a unique games (for which no other city bid) that was entirely reliant on existing infrastructure. The one million visitors to London this July and August, and the construction of the Olympic Park, will undoubtedly benefit the UK economy in the short term but determining the longer standing legacy of this summer’s games, poses a more difficult question.

The immediate effects are clear: 250,000 jobs, 11,000 new homes, improved transport links – including a cable car over the Thames, alongside a predicted £41m domestic and £700m tourist consumer spend. Various reports have been published recently that look at the effects of previous ‘mega events’ on host cities. The general consensus is that the consumer spend at London 2012 will far outstrip any previous games; it is predicted to be double that of both Athens and Sydney, and significantly more than Beijing. This is largely due to London’s accessibility, proximity to Europe and simply the higher cost of visiting the city.

Investment in the games has come at a crucial time. An approximate £6bn has been awarded in over 1,500 contracts to businesses across and beyond the UK; £6.5bn has been spent on infrastructure and it has necessitated a £2bn supply chain. The exposure and perceived success of some UK firms involved in the games has won them global contracts from big name companies and, in total, London 2012 is predicted to contribute £1.37bn to the UK’s annual economic output and sustain an additional 17,900 jobs each year until 2015.

Earlier this year the Harvard Business Review featured a number of articles exploring the ‘happiness factor’ in economics, assessing the impact of well-being and satisfaction on business and the economy. Large-scale sporting events create a vital feel good factor that is felt across all the nations who take part and create a positivity that cannot be measured in figures. Regardless of the bottom line, London 2012 has created and will sustain jobs for the foreseeable future, has provided British business with unique opportunities and has led to the largest urban development project ever seen in Europe. The excitement in London is building, and with most of the action taking place within just a few miles of the RSM Executive Office, we look forward to celebrating the games and the long term legacy.

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Filed under Economy, In the news

Austerity alone will not lead growth

European governments are facing a clamour of calls to ditch austerity measures and start spending.

The most rational of these calls are from those who wish to find a middle ground, understanding that is very hard to nurture economic growth without some form of stimulus.

It is very rare for an economy to simply change gear without a significant catalyst – be it the growth in a particular industry, political reform, or a significant innovation which a country is in a unique position to capitalise on. My own perspective is that, outside of pure chance, growth tends to follow intelligent strategic investment.

A fascinating comment piece in the Financial Times by Professors Marcus Miller and Robert Skidelsky of Warwick University questions the validity of austerity, and presents a very clear and concise case for the adoption of pragmatic growth measures as a solution to the current economic woes.

Devising ways to reduce debt without austerity is imperative. Assessing the current turmoil and drawing parallels with the 1930’s, they argue that sovereign debts must be managed in ways that do not destroy the economy or the political centre ground – as is the threat from a rigid austerity programme

According to Miller and Skidelsky, growth will only be achieved through increased project spending, restructuring of debts and shifting debt onto future generations. This basic foundation will create breathing space in which countries can climb out of the current morass.

I certainly appreciate that it is important that austerity measures be adopted at the early stages of a debt crisis – in the most recent crisis, it was important to show bond markets that tackling the debt mountain was a priority. With these initial measures in place (and as growth slides backwards and tax receipts fall), the question should be not if, but when, we begin adopting growth measures in earnest.

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Filed under Economy, Effective business, Europe

Resource rich Australia grapples with a two speed economy

Last month GE reported a 26% rise in revenue from Australia. The resource
rich nation exceeded China revenue by US$100 million, and the company
expects Australia will surpass China again in 2012. According to the Wall
Street Journal
GE expects that the price of minerals will remain strong and support Australia’s burgeoning mining sector.

For GE, this presents an immense growth opportunity fuelled by sales of
industrial equipment to nations that produce healthy amounts of oil, gas
and iron ore.

Alongside Australia, GE CEO Geoff Immelt pointed at Canada, Peru and
Mongolia as other targets for the firm. He noted that these nations are
more or less geographically equal in size to China, but are “not as hard”
to do business in. The challenge for these countries is to develop
economies which holistically benefit from a boom in one sector.

Much is being made of Australia’s “two speed economy”. Its fully-fledged
mining boom is pushing the resources sector far ahead of the rest of the
economy, which is flagging under the weight of an increased trade deficit.
The strong Australian dollar is the culprit for these woes.

Then again, ask any European finance minister to consider a job swap, and I
am sure you’ll get no complaints about taking on the role in Australia –
low unemployment, low inflation and low interest rates are not to be
scoffed at.

There is some heavy work going on in Australia to align the economy. Budget
cuts were unveiled last week and the Government announced they are aiming
at going from deficit to a surplus of AUS$1.5 billion for 2012-2012.

There are, of course, a couple of issues GE and other companies in a
similar position need to be mindful of.

The incoming Minerals Resource Rent Tax (MMRT) is a tax levied on 30% of
the “super profits” from the mining of iron ore and coal in Australia. The
tax kicks in at profits of $75 million and while 320 companies could
potentially be affected, it will certainly raise the cost of doing business
with these firms. The Government expects the tax will raise around AU

Furthermore, the labour market is very tight and companies looking to work
within the sector will be competing for experienced staff. This will cause
further wage inflation and a tighter market than already exists.

The challenges and problems are there, but in looking at the global
economy, I would rather be a finance minister wrestling with sustainability
issues rather than existential issues. A two speed economy is certainly
preferential when your only other option is a one speed economy heading

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Filed under Australia, Economy, RSM Regions, Tax

Guest post: Indian government reforms will lead to sustainable growth…

India continues to make great strides as an economy. Policy decisions made by the Government will increasingly reverberate around the world.

I am delighted to share with you the first post from Suresh Surana, founder of RSM Astute Consulting Group in India. Dr Surana is a leading commentator in India, and I hope to include more of his insights in the blog over the coming years…

India has successfully moved from a position of developing economy to emerging economy on the world map. This is a responsible position, considering the rise and fall of India’s growth rate has an impact on global growth and confidence. The same is also carefully observed by India’s trade partners and policy makers around the globe.

India’s growth through to 2013 is projected to be around 7.5%. This medium-term growth outlook is positive due to a young population and corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy.

There have been some questions about the sustainability of this growth, which is certainly increasing the need for a solid programme of structural economic and fiscal reforms. Reforms will also go some way to repair investor confidence which has been ebbing away of recent owing to perceived wide spread corruption, increase in cost of finance and, of course, a historical lack of progress on economic reforms.

There have been a number of small reforms in the area of infrastructure, such as the extension of the viability gap funding mechanism to support public-private partnerships, doubling of the amount to be raised through tax-free bonds and wider use of external commercial borrowings in sectors such as roads, power and civil aviation. Measures like allowing qualified foreign investors in the corporate bond market and allowance of venture capital fund investment to all sectors as opposed to restricting this to specified nine sectors as in the past will also have a positive impact on some companies.

There are some structural fiscal reforms planned in the Finance Budget 2012 worth noting:

- Direct Tax Code (DTC)
The DTC consolidates and integrates all direct tax laws and replaces both the Income-tax Act, 1961 and the Wealth-tax Act, 1957 by a single legislation. The Government seeks to provide a modern tax code in step with the needs of a fast growing economy. This would ensure ease of usage by simplification of language.

- Goods and Services Tax (GST)
India has a number of indirect taxes with multiple cascading effects; the GST is aimed at consolidating all indirect taxes for providing ease of performing business in India.

- Foreign Direct Investment norms
It is expected that the government will push its efforts to pursue opening up the multi-brand retail sector for foreign investors. Also, it envisages increasing foreign participation in the aviation and power industry.

- Thrust on infrastructure
The drive on improving infrastructure facilities in India has been further strengthened. The Budget spending for infrastructure is aimed at INR 600 billion for the twelfth five year plan beginning from 1st April 2012.

- Capital Market
Various steps are proposed to be taken for deepening the reforms in the Capital markets, by allowing foreign retail investors to access Indian Bond Market.

There is no doubt that over the long term the Indian economy will continue to grow. How it grows is very important as to be globally competitive, rather than just create a “large market”, India needs to develop into a world class economy. To deliver this the government will need to maintain a firm programme of structural reforms which can constantly adapt the economy to compete in the top tier.

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Filed under Economy, Guest Post, India, Tax

Welcoming the first of our guest bloggers…

It is a real pleasure to welcome the first of our guest bloggers from around the RSM network. Opening up the blog to our experts will gather us some useful insights into the global business environment as well as the markets we operate. This week I am delighted to feature post from Mike Kirley, Chief Operating Officer and International Strategy Leader at McGladrey, the US member firm of RSM.

US off to a bright start in 2012

A manufacturing resurgence, decreasing unemployment, companies investing in growth again — some strong rays of sunshine have begun to show through what has been a cloudy business environment in the U.S. for the last few years. Optimism is increasing across many segments, particularly among the dynamic middle-market companies McGladrey serves. These growing, mid-sized organizations fuel a diverse and healthy U.S. and global economy.

McGladrey’s winter 2012 Manufacturing and Distribution Monitor, a rare slice of data that gives insights into privately owned manufacturers, showed that the number of executives optimistic about the U.S. economy is 146 percent greater than it was in fall 2011. Confidence in the global economy also increased significantly — a critical data point since many participants have international operations. Most importantly, the number of participants who said their companies are thriving and growing averaged 45 percent throughout 2011. This is nearly twice the level of the previous year’s survey and comparable to pre-recessionary numbers. It’s too soon to say whether the U.S. manufacturing renaissance will become reality; however, we are encouraged by these insights from our research.

Manufacturing is not the only sector showing increased optimism. As one of the nation’s leading firms serving private equity groups, McGladrey saw an increase of 40 percent in our transaction support services practice last year, a key indicator of overall growth in private equity. In addition, IPO activity is heating up again. We were recently engaged by one large private equity firm to begin the process of preparing 48 of its portfolio companies for the IPO journey. It will be interesting to see if the JOBS Act further increases IPO activity within our client base.

We’re also witnessing companies freeing up cash they were previously holding to invest in other areas like technology and operational improvement projects that were shelved during the recession. Particularly in the middle-market, companies are looking for guidance on getting more out of their technology as they replace older systems with world-class solutions. They are also seeking opportunities to drive down costs with a focus on right-sizing relative to revenue growth vs. the across the board cuts we have been seeing. Finally, they’re looking to improve in areas such as financial processes and supply chain to be more competitive.

Even so, we don’t anticipate clear skies just yet. The U.S. housing market continues to be soft in many parts of the country, it’s a presidential election year, energy costs are rising again, and tax cuts that affect many mid-sized businesses are set to expire on 31 December, 2012. In addition, middle-market companies are facing increasing regulation domestically and abroad. Any one of these things could greatly impact their strategies and ability to invest in growth.

This is where McGladrey and our RSM International colleagues come in. Through our deep understanding of our clients’ unique situations, their industries and the general economic and regulatory environment in which they operate, we are able to help them make confident business decisions to drive their future success both here at home and around the world. No matter what the forecast.

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Filed under Economy

Planning for an interesting 2012

If 2011 was anything to go by we are in for a very interesting year. From The Arab Spring to hard hitting government austerity measures, the call for radical changes to banking practices and, closer to home, the long awaited debate on audit dominance – we witnessed a year of unprecedented headlines.

As business leaders, we have no control over these macro issues. Our role is to ensure our businesses are planning for change.

Looking at the global picture, and I am pleased to say there are positives out there. Just take a look at the surprise economic data rolling out from the US in the last few weeks – manufacturing is buoyant and unemployment is at a three-year low, with most jobs being created by the private sector. This indicates the plausibility of a sustainable, if mild recovery.

In China, the overheated property market is still causing concern, but  inflation is easing, providing policy makers with more tools to ensure a softer landing for the economy as it slows.

Meanwhile in Europe, there remains no solution on the horizon, and the bad news keeps mounting as more and more EU members are downgraded. Angela Merkel’s desire that the “euro must not fail, and will not fail” appears increasingly wishful thinking rather than solid policy based on the combined political will of member states. In November David Bartlett, our Economic Advisor, wrote a paper on the potential fallout from the Eurozone problems. Interestingly, he noted that leading banks were already preparing for a breakup of the currency area.

In response, the FX industry is planning to best handle post-euro break-up trade and HSBC is planning how to trade the new local currencies, as reported by Reuters. In times of uncertainty, good planning is not about predicting what will happen in the future, but instead preparing your business to cope positively with change.

2012 is likely be a year in which businesses need to be pragmatic and react quickly by building strategies to mitigate risk in an incredibly dynamic political and economic environment. I cannot think of a testier issue to start a year with than the threatened collapse of one of the world’s leading currencies.

Too big to fail? No such thing – get planning.

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Filed under Economy, Management, Risk, RSM Regions

Talking Points – Fallout of the Euro Crisis

Read the latest edition of RSM International’s Talking Points article, ‘Fallout of the Euro Crisis’ written by David Bartlett, RSM’s Economic Adviser.

David gives a concise summary of the current state of the economy in the Euro Zone – the picture is rather grave and is changing on an almost daily basis. The OECD report issued on 28.11.11 echoes the key points of the article. The next major event is the EU summit on 9 December, which will focus on the institutional reforms addressed in this article. David will provide further analysis following this summit.

This and previous Talking Points articles can be found on the RSM International website.

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Filed under David Bartlett, Economy, EU, Europe, Risk, Talking Points