Category Archives: Europe

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

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

Guest post: Financial Transaction Tax: Learning crucial lessons from Sweden’s misadventure…

For many years Europe has struggled to introduce financial transaction tax (also known as FTT and Tobin tax). In 1984 when Sweden first installed FTT, it set off a chain reaction of events which effectively strangled its domestic financial markets until the tax was eliminated, six damaging years later.

The introduction of an FTT has recently been added to Hungary’s policy makers’ agenda. Zsolt Kalocsai, the Managing Partner of RSM DTM Hungary, RSM’s Hungarian member firm, believes that we should look at the case of when Sweden brought in an FTT back in the 1980’s…

The key development was in 1986 when Sweden erroneously doubled the tax, driving 60 percent of the turnover of its 11 most actively traded shares to move to London. By the 1990’s 50 percent of the Swedish stock exchange’s former turnover was traded in London, and most dramatic of all – futures trading fell by 95% and bond trading fell by 85%.

Key elements:
1. Foreign investors reacted to the tax by moving their trading offshore

2. Domestic investors reacted by reducing the number of their equity trades

3. Tax revenues from FTT were almost entirely absorbed by the drastic reduction of the personal income tax on the capital gain of transactions

4. Markets hated the FTT – The Stockholm stock exchange dropped by almost 5.5 percent and later, in response to the news of the increase of tax, shares fell a further 1 percent.

5. FTTs are not guaranteed to earn – the actual revenue from FTT for government securities in Sweden was a dismal 4 percent of the predicted tax revenue.

Sweden’s misadventure teaches us that the introduction of an FTT can clearly have dramatic implications for financial markets, with the potential to do long term damage.

These are important lessons and highly relevant today. The risks of the FTT are clear. But would these risks be mitigated by the introduction of regional or global FTTs? Probably yes, but the likelihood of such happening is remote.

If applied to Europe, transactions would (by their nature) move to the American continent or to Asian financial markets immediately.

So it is no coincidence that many EU member states are clearly against the introduction of FTT including the United Kingdom, Italy and, no surprise, Sweden.

Introducing an FTT is not a simple decision for policymakers as the historical evidence points to the risks almost certainly outweighing the benefits.

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Filed under Europe, Tax, Technical News

Guest post: Insights from an International Tax Advisor…

Our latest guest post is courtesy of Mario van den Broek, Partner,
International Tax Services at RSM Niehe Lancée Kooij in the Netherlands.
Mario is one of the most senior tax professionals in our industry, and I am
delighted to welcome him to the RSM World blog…

International tax structuring has undergone significant changes. Although
the principles have not really changed, the implementation of tax
structures indeed has. Whereas “ in the old days”, it was quite easy to put
together boxes to find the most efficient structure for our clients,
nowadays it is crucial to not only consider the substance of a structure
from a tax perspective but also whether or not it is still worth it to a
company to actually implement a supposedly efficient structure. In
addition, we regularly come across companies that are left with advice on a
structure, and even with the structure itself, but without any proper idea
of how the benefits of the structure should be achieved and maintained.

That makes the role of a tax advisor only a more interesting one. It is
important to stay on top of the most recent international tax developments,
but also it is important to be able to be a sparring partner to a global
operating company and form an opinion on different kinds of taxes
(corporate tax, wage taxes, VAT) and elements (transfer pricing). In
addition, it is crucial to act as a coordinator between the different
countries where a company has operations. Our global operating clients need
to focus on doing business but also have to realize that remaining in
compliance with local tax regulations is a crucial element of doing
business across borders. Of course, quite often, that is not the first
matter of attention.

I could talk for hours about the different international tax developments
and by referring to items such as treaty protection, beneficial ownership,
tax control framework, exit taxation, transfer pricing, VAT reclaims and
cross border mergers, I have already started to do that. But let me stop
there as I would like to point out a different element that is key in
building and implementing tax structures. Know what it is? Teamwork. And
not teamwork created by collecting names of colleagues in a nice directory,
no, I am talking about real team work which is established by meeting with
each other, talking to each other face to face and meeting clients

As part of my role as international tax adviser I spend a lot of time
working with my colleagues and although I try to stay up to speed with
technology by for instance using Dropbox to share documents with my foreign
colleagues on the new Ipad, or using Webex on my laptop to go through
presentations page by page, nothing beats face-to-face cooperation.

Therefore, it is very important to create space to develop this process. I
really make a point to travel, investing in time to both educate and learn
from my colleagues. Even though my base lies in the Netherlands, I work in
such a way with RSM partners all over the world. From New York to Sydney,
from Hong Kong to Denmark, our success and our ability to distinguish
ourselves from our competitors lies in the frequency of how often we meet
with each other and work with each other. It makes for a strong, people
focused network. That is what RSM is about.

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Filed under EU, Europe, Guest Post, People

Tougher measures needed to increase number of women on boards

Today Commissioner Reding of the European Union called for a period of consultation to address the serious issue of increasing the number of women in economic decision-making positions.

Calling for the need for faster progress, she pointed to a number of studies proving that diverse boards are linked to profitable enterprises. While the Commissioner is primarily aiming to achieve “credible self regulation” for companies, during the press conference she also commented that she was not opposed to a form of quotas due to their effectiveness.

I issued a statement in response:

“European companies must do better at leveraging, promoting and developing female talent. There is an alarming disparity between the number of women entering the workforce and those who eventually reach senior management positions.

Proposals for European-level legislation to set binding targets for Women on Boards is both welcome and essential. Equality within the boardroom is drastically lagging and realistic quotas are a necessary evil to kick-start the changes needed to create a correct level of diversity. This is going to be an extremely interesting 3-month consultation period, and I urge forward thinking business leaders and governments to fight for results-driven measures rather than codes of conduct and weak self regulation.

Companies with diverse boards are more sustainable, profitable enterprises. Measures to secure this diversity are of paramount importance to the economic health of Europe.”

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Filed under Corporate Culture, EU, Europe, Management

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