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October: Companies preserve cash flow; acquisitions still strong, and much more

Cash cows
KPMG
expects FTSE-350 companies to generate a cash surplus of £301.9bn by 2010,
substantially higher than its forecast in January 2007 of £198.6bn. The firm’s
Cash Counter, which uses historical and forecast data to calculate cash flow,
added that FTSE-100 companies would amass a surplus of £278.3bn by the end of
2010, up by 60.6% from the January 2007 forecast of £173.3bn.

Rat race
More senior executives are leaving the UK for overseas vacancies, than foreign
executives are arriving to fill roles here according to executive search agency
Experteer. Studying the career movements of 13,000 executives,
Experteer
found directors were looking abroad to further their careers and escape the
economic downturn. Forty-two per cent of European executives chose to move to
Switzerland, while France is suffering the highest exodus rate, with 14% of
executives leaving.

Pay packet
A difference in compensation levels shows a split between the top 30 companies
in the FTSE-100 and the rest, says
Deloitte.
Research by the firm showed that directors in the top 30 could expect to see
their salaries exceed £1m and could expect to earn four times their salary from
a raft of financial incentives, compared to just under three times for the
remaining FTSE-100 directors ­ who could expect to earn salaries in the region
of £750,000.

Cash flow
Companies are slashing costs to preserve cash flow and are tightening credit
control on customers, says accountancy firm
MacIntyre
Hudson
. In a survey of 500 businesses, McIntyre Hudson revealed that 75%
have imposed tougher controls over operational spending, while 44% reduced
capital expenditure. Introducing tougher credit assessments for new clients was
highlighted by 44% of respondents and 47% were tightening controls for existing
customers.

Buy and build
Acquisition activity has not been dampened by the economic downturn, according
to the
Office
for National Statistics
. The value of acquisitions of UK companies by UK
companies doubled in Q2 2008 to £8.7bn from £4.3bn in Q1. Buyouts by UK
companies of foreign companies decreased slightly, to £18.1bn in Q2 from £20.7bn
in Q1 2008.

Hold fire
Greater flexibility is needed to manage staff if companies hope to succeed in
their business strategies, advises
PricewaterhouseCoopers.
PwC director Debra De’Ath has said she believes redundancies could be a
“knee-jerk reaction” to the credit crunch, but would prove costly in the
long-run due to payments in lieu of notice and recruiting staff again in an
economic recovery.

De’Ath noted that companies would be better off adopting greater flexibility
for staff and managers should retain talent through the downturn.

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