By Jonathan Stringer, CFO Practice Director at Norman Broadbent Interim Management
Compared to last summer, this quarter has seen an increase in the level of optimism surrounding general financial certainty. Whilst optimism collapsed following the UK’s vote for Brexit and then again as a consequence of the general election in June, the latest surveys reveal a shift in attitude from the post-election melancholy, with confidence nearing levels not seen since the end of last year. According to a report recently published by Deloitte, 72% of CFOs expect negative long-term effects from Brexit. Furthermore, there was a large reduction in uncertainty surrounding the fourth quarter with levels dipping to 34%, back to the pre-general election level. However, CFOs continue to report that cost pressures are higher than ever, reaching levels unseen for more than six years; meaning profit expectations will continue to suffer. Even with the decrease in uncertainty the levels of cost pressure still remain high, with 58% of CFOs continuing to rate Brexit as their chief risk. Another area of concern cited was towards the weak UK demand, with 92% of CFOs surveyed by Deloitte expecting rates to rise in little over a year from its level of 0.25%. Norman Broadbent Interim observed a sharp increase in demand for Finance Interim Transformation Specialists who could support businesses define the new target operating models, in addition to recruiting interim Shared Services Centre Specialists who possess expertise in relocating or outsourcing back office functions such as P2P, O2C and R2R to more cost-effective locations. For many CFOs it was not only about reducing costs, but implementing a more consistent process across the collective business unit whilst attempting to not only automate, but standardise their high volume transactional tasks. Even with a shift towards optimism, the current climate has still not encouraged CFOs to leave the defensive mentality they adopted in the second quarter of 2017. However, CFOs have softened their stance in regards to cost reduction which has dropped from 46% to 41% and increased their cash flow. Additionally, firms are now placing less emphasis on introducing new products and services, as well as expanding via acquisition. With the increased optimism and ongoing difficulties within the UK market, CFOs still remain defensive but are placing less emphasis on these protective strategies which were more prevalent within the second quarter. At the turn of the year, there will be greater organisational focus towards the Eurozone. The ECB is now expecting a growth rate of 2.2% by the end of 2017, which is the fastest rate in a decade. A reduction in economic and deflation concerns means the Eurozone currently offers firms greater stability for investment. The challenge for CFOs now remains to find ways of increasing revenue whilst managing elevating operating costs. Whilst an improvement in capital expenditure can be noticed, as well as hiring and discretionary spending in the third quarter, 71% of CFOs expect operating costs to increase, which would lead to the highest levels in more than six years. Norman Broadbent Interim has seen a high level of demand for Interim Commercial Finance Directors as well as Interim ERP system implementation specialists. Businesses now require a greater degree of commercial insight from their finance leaders in order to support strategy over the next two to three years, coupled with high levels of demand for finance implementation specialists to deliver new ERP systems. Many clients are striving to achieve greater commercial insight across the business through operating on one technology platform. Norman Broadbent Interim has noticed an increase in the use of Consultancies to help review and advise on re-engineering their operating model and make strategic recommendations on delivering projects to a satisfactory level. Clients now require interim Finance professionals who will support in the delivery of this strategy and embed new processes on time and on budget. When asked about alternatives to using a consultancy, the responses tend to reflect that clients require a more cost-effective delivery solution with emphasis on knowledge transfer to their existing team, as well as upskilling their existing workforce through the process in order to ensure effective delivery of business as usual post-implementation. In conclusion, optimism, driven by increased stability and growth internationally, is improving alongside a reduction in risk perception, yet levels continue to remain high. Brexit still dominates the landscape when it comes to risk and firms, despite becoming more optimistic this quarter than last are still uncertain about the level of growth the UK can expect in the future. If you would like to find out how Norman Broadbent Interim can help your organisation, please contact Jonathan Stringer Director, Norman Broadbent Interim, for an initial confidential discussion.