February News Update

Employment
Nearly 900 jobs will be slashed as Bosch announced plans to close its south Wales plant. Bosch's management had considered making 300 people redundant or closing the plant altogether. Its management said it recommended to the board that the plant be closed and all operations transferred to Hungary in 2011.

It’s been an appalling month for UK businesses with the looming prospect of more UK job losses in the wake of the takeover of Cadbury by Kraft. The revised offer of 840p a share, financed by debt, means there are now around 6,000 Cadbury employees in the UK that could lose their jobs.

The number of unemployed people in the UK fell to 2.46 million in the three months to December 2009, a decline of 7,000, according to official figures released at the end of January by the Office for National Statistics. It is the first such decline since May 2008.

Employee confidence rose by 2.6% in the last quarter of 2009, according to human resources consultant Kenexa. Its survey of worker opinion has shown that employee confidence is influenced by a range of economic and business performance outcomes “at the individual, organisational, industry and country level" while that level is predictive of consumer confidence.

Taxation
Mayor of London Boris Johnson has accused chancellor Alastair Darling of “fast tracking the departure" of the finance and banking talent pool out of Britain by way of enforcing the 50% tax on bank bonuses. But HM Treasury said that enforcing the new measure was about ensuring the City remains a global financial centre. Johnson also added his name to the chorus for global regulation as opposed to UK-centric regulation of financial markets and banks.

City of London Corporation chairman Stuart Fraser said that by implementing the 50% tax on bank bonuses, the government has sent out a “unilateral message that the UK does not welcome high earners” and the move has proven to be “music to the ears of rival global financial centres,” according to The Evening Standard.

The Equality and Human Rights Commission has published its proposals on how businesses and other organisations should analyse and make public their gender pay gaps. The voluntary guidelines are expected to have an impact on financial institutions, where the gender pay gap appears to be the most extreme. In particular, the focus will be on women who currently receive as much as 80% less in performance-related pay than their male colleagues, says Rachel Dineley, head of diversity and discrimination unit at law firm Beachcroft.

Bank of America and Morgan Stanley have revealed that they plan to reduce compensation across their global workforces as a result of the UK tax on bonuses.

Government debt
Interest rates were left unchanged at 0.5 % by the Bank of England in January, as the Monetary Policy Committee continued its policy of keeping the price of money at record lows so as to stimulate the economy. The MPC also said it would continue with the £200bn programme of quantitative easing until February.

Credit ratings agency Moody's has joined Fitch and Standard & Poor's in deciding to downgrade the sovereign debt ratings of Greece amid declining confidence in its ability to address its fiscal deficit. The country's government had announced big spending cuts to reduce the debt but that did not convince Moody's.

The UK government is failing exporters by refusing to underwrite the issue of bonds needed to win overseas orders and guarantee the performance of export contracts, according to Aon Trade Credit and the British Exporters Association. Both organisations have called for the government to follow in the footsteps of other European countries and play its role in providing bond support to boost UK exports.

Capital goods orders regularly require a financial guarantee known as a performance bond, which the company’s bank provides. But these are harder to come by now that the banks are rebuilding their balance sheets and taking a more cautious approach to lending.

UK public sector net borrowing hit £15.7bn in December, £1.9bn higher than the same time in 2008, which represented a new monthly record. The public sector budget deficit also grew £400m from the previous year, according to figures from the Office for National Statistics. The figures put further pressure on Alistair Darling to set out realistic plans in what could be his final Budget, to reduce the mountain of debt the government presides over.

Economic recovery
The number of corporate insolvencies increased by 12% during 2009 but that represented a dramatic drop compared to the 29% increase during 2008, according to the latest Insolvency Index from Experian. It said that the overall financial health of businesses in the UK saw a significant improvement in 2009, while the annual rate of insolvencies increased at a slower rate compared to the previous year.

Twelve percent of UK employers intend to recruit fewer staff as a result of the planned 1% hike in National Insurance Contributions in April 2011, while another 8% will go so far as to make more job cuts. The Chartered Institute of Personal Development and the British Chambers of Commerce want the government to avoid further statutory increases in the cost of employing people while the economy gets back on its feet.

Accountants’ financial skills are fifth on a list of key skills to aid recovery, according to a survey from McKinney Rogers. While the world’s largest businesses are looking to strong leadership and in particular, financial skills to help navigate 2009’s recession, the four top skills for the recovery are seen as leadership, strategy, innovation and sales skills.

Moody’s believes that the creditworthiness of issuers in non-financial sectors across Europe, the Middle East and Africa will stabilise in 2010 as economic recovery takes hold but says that maintaining adequate liquidity levels will continue to pose a challenge. The agency revised some industry outlooks to stable from negative over the past few months and says it may revise more throughout 2010.

Accounting and auditing
The dual issues of global convergence and accounting for financial instruments are set to dominate the accounting landscape in 2010, according to Fitch rating’s report, Global Accounting and Financial Reporting: 2010 Global Outlook. A number of countries are gearing up to fully adopt International Financial Reporting Standards in the next two years, including Brazil, Japan and Canada. Meanwhile, the US awaits the Securities and Exchange Commission's plan to announce a decision on the adoption of IFRS by all public companies.

Sixty-seven percent of internal auditors believe they are under-resourced and are unable to conduct their jobs effectively, according to risk consulting company Protiviti. Just 14% believe they have the access to all the skills needed to meet the requirements of their audit charter. Prior to the recession, 40% said their internal audit function was not focused on the right risks and were therefore unable to adequately assess and carry out their requirements.