Scotland’s finance directors predict flat growth over coming year

The survey of more than 100 FDs, CFOs and Senior Finance Officers conducted by ICAS, the global professional body for Chartered Accountants, found that half of the Scottish-based FDs polled think that growth will be flat or negligible over the next 12 months.

Results of the poll, carried out in partnership with law firm DLA Piper, showed only 42 per cent expect to see strong or modest growth in the coming year.

In comparison, this time last year, 82 per cent anticipated modest or strong growth in the year ahead.

The UK-wide picture is more positive, where one in three (37 per cent) of FDs think growth will be flat or negligible and 58 per cent expect strong or modest growth.

For a significant minority of FDs polled, the depressed oil price was seen as the most critical barrier to growth. Across the board, however, the problem of skills shortages was rated as the biggest barrier. “Staff recruitment and retention” featured in the top three issues on the FDs’ personal agenda, just after “controlling costs” and “growing revenues”.

Weak confidence, among consumers and in the business sector, is seen as another significant barrier to growth. Also cited were red tape and regulation, the slowdown in Chinese growth and uncertainty over the UK’s future in the EU.

The majority of FDs believe the key to boosting economic productivity over the next 12 months lies in the hands of businesses themselves, rather than action on the part of Government. Better employee motivation, improved business processes and greater investment in training are cited as the top three measures which would help improve economic productivity.

The risk of redundancy looms large for businesses. More than one in four (28 per cent) anticipate redundancies in their organisations during the remainder of 2015. Just 19 per cent expected redundancies when asked this time last year.

Controlling costs, growing revenues and staff recruitment and retention were once again highlighted as the top three priorities facing FDs. However, the more prominent role of IT across business operations has seen cyber security and other IT issues move further up their list of priorities into the top 10.

External pressures remain largely unchanged in 2015 compared with last year. 91 per cent of FDs have not experienced reduced availability of bank finance in 2015 (89 per cent in 2014). Bad debts are slightly more prevalent, with 34% noticing a rise in bad or doubtful debt compared with 27 per cent last year. Also, 24 per cent were experiencing “significant” downward pressure on prices (2014: 8 per cent).

Simon Rae, office managing partner of DLA Piper in Scotland said: “The economy will have plenty to contend with over the coming year including the impending EU referendum, the prospect of a rise in interest rates and the expectation that oil prices will continue to stay depressed. However, as in previous years, if the views of our FDs provide an insight into what we can expect, with a degree of caution we should still be looking for modest growth.”

ICAS CEO Anton Colella added: “The new number one at the top of Britain’s risk registers is the difficulty of recruiting the right staff with the right skills to grow our economy. The skills gap is not just a problem in construction, manufacturing and technology but a red flag across almost every sector in the UK. If we are to ensure sustained growth in the UK economy then this must be addressed and it requires a concerted effort by business, government, education, and the workforce.”