Tag Archive | "recovery"

More than eight out of ten accountants wants to jump ship

Accounting firms could find themselves without key members of staff as more than eight out of ten employees, including accountants for contractors, are considering changing job.

Definitive Consulting, a City recruitment specialist, recently surveyed senior executives and discovered that although 65% thought their employer successfully retained staff during the economic crisis, less than 10% said they have been very successful at keeping employees happy and engaged since the recession ended. And only 8% were very confident that their employer would make the correct people decisions whilst the recovery was still ongoing.

As a result of these negative feelings, 82% said that unless they are guaranteed a salary increase and a bonus, they will move to a new employer within 12 months. Out of those, 22% said they were ready to move immediately and 43% said they plan to change jobs within the next six months.

Almost two-thirds of the survey’s respondents said their employer doesn’t appear to be following a clear employee retention plan. Instead they are reacting to circumstances and making high counter-offers to encourage employees to withdraw their resignations.

The report went on to point out that employers seem to have learnt from the 2001 downturn when redundancies led to a skills shortage and high wage inflation. Instead, firms implemented salary and bonus freezes, long term leave and secondments to reduce costs during the economic crisis.

The MD of Definitive consulting, Darren James, said this strategic approach seems not to have extended into the recovery period. Employers need to stabilise the situation as a matter of urgency to stop key employees jumping ship.

Employers may want to bear in mind that the small business community values the advice of accountants highly. 48% of respondents to an unbiased.co.uk survey said that accountants helped them save money, 47% said they helped make sense of the UK’s complex tax system and one in five admitted they were their most valuable source of advice.

More than a quarter of the small business owners questioned said they had more time to focus on running their business if they used an accountant and 10% said they had more free time to spend with family.

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Are accountants for contractors among the most pessimistic in the world?

Compared to business owners in other countries, Britons are among the most pessimistic, according to research by Grant Thornton.

The bad news is, this could include online accountants!

The International Business Report for quarter 2 shows that optimism amongst UK companies has dropped 9% year-on-year, and 14% since the first quarter of 2011. The Report looks at the views and expectations of over 11,000 companies in 39 economies.

UK business optimism is higher only than Japan, Spain and Greece, countries that have suffered severe financial or environmental upheaval. The downturn in the UK is linked to concerns over the economy due to the drop in consumer spending, weak bank lending and the decent demise of some high-profile retailers.

Companies in the UK expect their profits to decrease as well as their ability to invest in plant and machinery and R&D. Despite that, UK firms do expect their revenue to grow by 4% and their workforce by 7% in the next 12 months. 53% of businesses also expect to award a pay rise in the coming year.

The CEO of Grant Thornton UK, Scott Barnes, said that although this report paints a bleak picture, it’s important to realise that there are some positive signs. Overall business optimism around the world has increased over the last 12 months and governments and international organisations must build on this and make credible decisions.

However, UK businesses could be in for a tough time as employee disengagement rises and many employees start to look for new jobs.

Research from Mercer shows that only 61% of employees get a feeling of personal accomplishment from their job, compared to 70% 4 years ago. 55% said they are proud to work in their company and 52% are committed to their organisation, down from 60% and 59% respectively in 2006.

36% of respondents said they were seriously thinking about moving on and 40% of them were in the 25 to 34 age bracket. The main reasons behind this growing dissatisfaction are salary freezes and cuts to benefits and training.

Employers should be worried that so many key employees are disenchanted, especially as they are an integral part of recovery plans.

Chris Johnson from Mercer said there is a general malaise in the workplace which can undermine business performance. Mercer’s head of employee research for EMEA added that employees now tend to take more self-interested view and if their expectations are not met, they take action to do what is best for them.

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Banks must do more to help small businesses get finance

A new report claims that the UK’s financial sector is not doing enough to support SMEs and this is damaging the economy.

Will Hutton, The Work Foundation’s executive vice chair, has submitted the report to the Independent Banking Commission, and says that despite bank assets growing to four times GDP, lending to corporates represents only 5% of all lending.

The report goes on to say that the lack of support for SMEs has discouraged borrowers from applying for loans. This lack of investment reduces innovation levels, which in turn creates a cycle of less dynamism, less investment and less innovation.

The authors of the report want to see rigorous ring-fencing, or separation, of commercial and retail banking operations from investment banking, as well as additional capital being made available. By doing this, internal frameworks would be changed and the financial sector would find it more attractive to lend to smaller firms.

Furthermore, the banks must stop concentrating on balance sheets and start to look on small businesses as positive investments which will strengthen the economic recovery.

The FSB also agrees that lending to small businesses must improve. The banks say small businesses are not applying for credit and yet a recent survey from the FSB shows that around 960,000 of its members asked the banks for a loan in the past 12 months and a third were refused. 16% of those refused were not told why their application was turned down.

34% of those who applied needed the funding to cover cash-flow, but 21% wanted finance to buy new machinery and equipment and a further 17% wanted to expand their business.

John Walker, the FSB’s national chairman, pointed out that the OBR forecasts that business investment will help to drive the recovery but this cannot happen until banks work with companies to make sure they get much needed finance.

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90% of Britains think the economy is in a bad state

Only 10% of people in Britain think the economy is good, ranking us amongst the gloomiest nations in the world, according to a new survey.

24 of the world’s largest economies were polled and it transpired that Japanese and Hungarian citizens were the only nationalities that were more negative than us. And the Japanese have a good excuse after suffering the massive earthquake and tsunami earlier this year.

In contrast, at least 70% of citizens in Australia, China, India, Saudi Arabia and Sweden think their country’s economy is good.

The majority of us can’t see a light at the end of the tunnel either. Only 10% expect the economy to strengthen over the next six months.

The survey was conducted by Ipsos MORI and its MD, Bobby Duffy, said the level of gloom was understandable. We have absurd house prices and the cost of living is rising a lot faster than earnings. It is not surprising that people feel pessimistic and this will impact growth.

It’s not only the man in the street who feels less than happy about the state of the British economy. The BCC has now downgraded its expectations for growth for this year and next.

The Chamber has knocked 0.1 percentage points off its GDP forecasts and at the same time increased the forecasts for annual CPI inflation.

In slightly better news, the organisation now expects just 2.6 million people to be unemployed 15 months from now, instead of the 2.65 million it predicted 3 months ago.

The director general of the BCC, David Frost, said the economy still faces difficult challenges. However, he believes the coalition is right to continue with its plans to reduce the budget deficit. But, the government must also come up with policies that enable businesses to drive the recovery, he added.

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Contractor accountants won’t be free from tax until May 30th

Contractor accountants may be interested to know that Britons will not start earning for themselves until May 30th this year, due to the VAT increase which comes into force today, January 4th.

The Adam Smith Institute has said that all monies earned between the 1st of January and the 29th May 2011 will belong to the taxman. On May 30th, Britons then begin working for themselves; a date coined Tax Freedom Day by the Institute.

This year, Tax Freedom Day is three days later than it was in 2010 and this is largely attributed to the increase in VAT from 17.5% to 20%.

The executive director of the Institute, Tom Clougherty, said the impact of the VAT rise will affect every household in the UK, denting consumer confidence and putting a dampener of the country’s economic recovery.

The coalition is correct to prioritise spending cuts and repairing the budget deficit but people in the UK remain seriously overtaxed. We spend nearly five months working solely to support the state and only seven supporting our families, which is a shocking indictment of a large and wasteful government, he added.

The OECD revealed last month that the tax burden in Britain is higher than in many of its peer countries, having increased since 1995. Taxes exceeded 34.8% of the OECD GDP in 2008, even though they have fallen in recent years.

Canada, Ireland, New Zealand and the U.S. have all reduced their tax burden in the last fifteen years and even countries like Denmark and Sweden, which levy high taxes, have reduced them. But the burden of taxation in the UK has risen by about 1.5%.

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2011 looks encouraging for most industry sectors

Contractor accountants with clients operating in or relying on a number of UK sectors will be pleased to hear of some positive growth.

For example, new research from the EEF shows that the UK’s manufacturing sector reported strong output and good order balances in quarter three.

Manufacturers have already started hiring new staff and making new investments which will undoubtedly come as welcome news for contractors. Ms Lee Hopley, the chief economist at EEF, said that the manufacturing industry was ending 2010 on a high and this will provide the sector with a strong footing to begin the New Year. EEF also predicts that manufacturing and engineering will outperform other contributors to the UK economy in 2011.

It’s not only the UK that has witnessed this welcome boost in manufacturing either. Markit Economics recently reported that last month, the manufacturing sector across Europe increased at its fastest rate for 4 months.

But manufacturing isn’t the only sector planning to expand next year. Research by PwC shows that 28% of firms in the UK intend to increase recruitment in 2011. In addition to manufacturing, the technology and services industries should see vigorous recruitment, the study showed.

The recent Growth Review from the government also contained encouraging news for a lot of UK contractors.

David Frost, from the British Chamber of Commerce, said that enterprises will be reassured now that the focus is to return to balanced, sustainable growth. The review talks about creating a framework for growth and also acknowledges the vital contribution made by SMEs. However, it remains to be seen whether the coalition can bring down the barriers that have been preventing firms from thriving.

One piece of not so positive news regarding the service sector has come from the CBI. Although professional and business services have remained steady over the past few months, consumer services have tumbled. The CBI cited reduced consumer discretionary spending as a contributory factor along with rising costs and falling prices.

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What does 2011 hold for contractor accountants?

The Autumn Statement from the government showed a revised prediction for economic growth next year. Previously the coalition has predicted growth of 2.3%, but this figure has now been lowered to 2.1%.

However, the IoD disagrees with this, claiming that economic growth in 2011 will be much lower. It likened the recovery cycle to a square root sign which has witnessed a temporary spurt in 2010 but will level off next year.

The IoD commented that the Comprehensive Spending Review has caused too much doom and gloom and the UK needs to realise that there are also other weaknesses in the economy. Lower than expected growth could cause George Osborne to increase taxes, a move which would affect contractor accountants and other freelancers. In fact, if the government’s predictions for GDP are accurate, the chancellor will have to choose between tax increases or further spending cuts if the coalition is to meet its budget deficit targets.

In other related news – although the government has committed to reducing corporation tax, the IoD claims that the new moves still do not go far enough towards attracting more foreign invest in the UK.

The IoD’s head of taxation, Richard Baron, said that whilst the Institute welcomed the fact corporation tax is set to reduce to 24% that still leaves the UK in the bottom half of the list of countries with an attractive rate.

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Choppy recovery but little risk of a further credit crunch

The August Inflation Report from the Bank of England, which was published yesterday, was not as optimistic as contractor accountants might have hoped.

Mervyn King, the Governor of the Bank of England, warned that the economy faces a choppy recovery over the next couple of years. The Bank has said they expect inflation will remain higher for longer than they had previously anticipated and this has led to a lowering of the economic growth forecast. The report also suggests that interest rates will remain at their historic low in the immediate future.

Previously, the Bank had expected to see growth of around 3.4% in 2011 but this has now been revised to around 2.5%. The main reason for the revision is the coalition’s decision to increase the VAT rate to 20% as from the beginning of next year.

Mr King pointed out that the continuing economic stimulus measures along with the drop in value of the pound were helping the economy to expand but this is being offset by the lack of lending from the banks, something that affects contractors.

However, King did stress that the cost cutting plans put in place by the government have reduced the risk of a double dip recession.

Economists were quick to comment with some saying the report was more ‘dovish’ than had been anticipated. Howard Archer, from IHS Global Insight, said the report reinforced their view that interest rates will remain at 0.5% until early in 2011. He forecasts that we will not the first rise in rates will until the summer next year.

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Contractor accountants call for a careful budget

Restraint should be the name of the game if we want to avoid another economic recession. That’s the message accountants are sending to George Osborne in advance of the June 22nd budget.

Although VAT and CGT rises are anticipated, members of MGI UK and Ireland hope there will be some assistance made available to counter any damaging consequences of these rises.

An interesting idea put forward by Andy White of Carter Backer Winter is bound to gain widespread support from employers. He wants to see employers’ national insurance contributions abolished completely; a move he says which would encourage companies to take on more staff. The resulting loss of revenue would be compensated for by an increase in income tax collections and the reduction in the amount of state benefits paid to the unemployed.

Other online accountants say they would like to see a cut in corporation tax rates and an overhaul of IR35.

Meanwhile, government departments are going to have their work cut out in the run up to the summer recess. They need to outline spending plans, which will then be checked against tough criteria, if they want to have funding approved. One of the new criteria that must be met is that projects are essential to help meet government priorities.

Small firms and limited company contractors could benefit from this rule as outsourcing the work could prove the most efficient means of getting projects completed.

George Osborne has said that we face a great national challenge. Government must rethink the way they spend money. Gone are the days of debt, irresponsibility, and waste and we must now find ways to get the country living within its means.

We inherited this terrible economic crisis but if we all work together we can put it right, he added.

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Businesses unsure about recovery could affect contractor accountants

Further signs that the country has seen the back of the recession came in the form of the Lloyds TSB Business Barometer.

The barometer revealed that 54% of UK businesses expect to see an increase in business activity this year, whilst only 5% are expecting a decrease. The findings are based on a poll of about 200 companies, including several leading contractor accountants and umbrella companies.

The business bank account believes that confidence has finally returned and they expect the economic recovery to continue.

There was however an air of caution in the report as 12% fewer firms said they were more optimistic now than they were 3 months ago and it’s the larger firms that are showing signs of pessimism.

This pessimism could affect the contractor accountant marketplace, as many of their clients are likely to provide services to these companies.

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  • Switch Accountants for FREE

    Switch Accountants for FREEAt K&B Accountancy Group we have introduced a simple and straightforward approach to changing accountants. We’re offering contractors, consultants and freelancers the opportunity to switch to K&B Accountancy Group for FREE without the need to pay for any ‘catch up’ or retrospective accountancy fees for the previous year’s accounts and corporation tax return* *T&Cs apply

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