Leadership styles Technology roundtable Sir Michael Peat Making Tax Digital

Alphabet, Apple, IBM, We speak to six experts The outstanding Bringing UK VAT-registered
Google, Microsoft, about skills, hype, achievements of a former businesses in line with new
Samsung: Who wins? investment, trust and risk royal private secretary requirements by April 2019

MARCH 2018 ECONOMIA.ICAEW.COM

MAKING WAVES
From AI and augmented reality
to telecommunications and
paperless loans, we explore
the technology that’s changing
the way we work and play
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 WELCOME

The leader

From automation
to how we measure
productivity, a
rapidly shifting
NOW IS NOT THE
TIME FOR MORE
RED TAPE

digital economy
Later this month the
chancellor, Philip
Hammond, will give his
first Spring Statement.
The idea, at least at the
time he announced
it, was that this would
is raising difficult
questions for
be the lightest of fiscal
events. Indeed, he
said he would merely

accountants.
update Parliament
on the state of the
economy, essentially
going through the
OBR’s forecasts and
highlighting what it The accurate measurement of a business, and assessment and validation of
means for the economy management’s claims based on this measurement, remains at the heart of the
in the years ahead. profession. This includes accurate and fair valuation of assets – including of a
It should hardly be business itself. As recent events in the stockmarket and around bitcoin have
a fiscal event at all. shown, the tendency of markets and investors to create bubbles that inevitably
But we have been either burst or deflate makes it difficult to gauge how justified and accurate
here before, with many valuations are. And the increasing digitisation of our economy, in which
many of Hammond’s initiatives begin with the aim of making life better and easier, often ends up
predecessors openly making things more difficult in unexpected ways.
professing a desire to Thus the new giants of the gig economy were created with the good intentions
not make much of a of making it easier for consumers to find a taxi, order something to eat or find
pre-Budget statement somewhere to stay – as well as helping people opt in to occasional, flexible work
before then gradually and turn cars, bikes and houses into income streams. It hasn’t taken long for
using the half-yearly this digital nirvana to fade into the grubby reality of legal battles over employee
update to launch rights and the responsibility to pay a fair share of taxes. The perception persists
more initiatives. As that many of these tech giants are happier to pay fines than taxes, confident in
last month’s ICAEW the knowledge that the convenience and extra income they offer consumers
Business Confidence makes it unlikely they will suffer reputational damage as a result.
Monitor showed, In order to thrive, economies are always shifting and changing and each
business leaders are generation looks back and sees nostalgic comforts, while looking forward and
more concerned than seeing change, upheaval, uncertainty and disquiet. But there is a more funda-
ever about red tape mental shift happening now, as a generation of so-called digital natives arrive
and regulation. We in senior management positions at established businesess, while the start-ups
would urge Hammond they founded take centre stage in our economies. With each new technology
to listen to them and platform that emerges, we rely more on smarter gadgets that are connected to
resist the impulse to do each other. And in this connected world our data is also more integrated than
anything this month. ever and thus more powerful and more valuable. But the generation now leading
many businesses – not to mention the consumers they rely on – are increasingly
comfortable with this exchange of personal data for services.
Have your say If automation ends up reducing the number of jobs available, the current
We like to hear from model of exchanging labour for wages, which contribute to government funds
readers about the for central services, will need to be reworked. One option might be to seek a
magazine or issues system of payment for the use of personal data instead. But it would require
facing the profession. consumers to stand firm and say “no” to giving data away to digital service
You can email us at providers. It may sound like last-generation thinking, but there are some lessons
economia@icaew.com from the past that can help to guide the future.

ECONOMIA MARCH 2018 3

08
Highlights

THE AUDIT

08 In case you missed it Stories

from the last month that may
have stayed under your radar
11 As I see it Beverley Tew
12 Tales from the frontline
Penny Scott-Bayfield
14 Debate Is net neutrality a pipe
dream in a capitalist world?
16 ICAEW news A roundup
of the Institute’s latest activity
18 From the top ICAEW president
Nick Parker

Transformational technology, such as AI, automation and big

data, can help business leaders stay one step ahead of their
competitors, but it can also be a headache for managers as they
contemplate potential redundancies, skills gaps and security.
economia invited six experts around the table to talk about
opportunity, challenge, best practice and why technology is so
23 important to business today PAGE 44

19
OPINION
24 HOT SPOTS
FOR TECH
Nick Martindale reports
on how tech hubs in
countries including
60 MEMBER
PROFILE
Sir Michael Peat has
received the ICAEW
Lifetime Award
66 MAKING TAX
DIGITAL The tight
timeframe for Making
Tax Digital for VAT
(April 2019) presents
19 Michael Izza, the US (Silicon Valley), for Outstanding challenges not just for
chief executive, ICAEW China (Shenzhen), Achievement in chartered accountants
20 Jo Owen Germany (Berlin) and recognition of a and HMRC but the
22 Bronwen Maddox Lithuania (Vilnius) are career devoted to public as well. The
23 Oxford Economics structured to support the promotion of deadline will also clash
national economies accountancy as a with that other big
COVER ILLUSTARTION BY DAVID MCCLEOD

– and why the force for good, his change on the horizon
ingredients for success services to the Royal – Brexit. Liz Loxton
and sustainability Household and for his reports back on how
cannot be forced. roles in establishing practices are getting
HRH The Prince of ready to comply.
Wales’ Accounting
for Sustainability and
Integrated Reporting
projects.

4 MARCH 2018 ECONOMIA

 CONTENTS

They’re the biggest technology companies in the world and

influence how we work and the way we play. So we asked
leadership guru Jo Owen to assess the qualities of those at the
top of Alphabet, Apple, IBM (Ginni Rometty, below), Microsoft
and Samsung and whether the new breed can ever live up to the
legacy of their charismatic founders PAGE 28

24
FEATURES

24 Tech clusters
28 Leadership
34 Fintech How this innovative sector
is changing the way we bank
40 Inward investment Could
thriving tech sectors suffer if M&A
rules are tightened?
44 economia roundtable
50 Company profile
Highly commended ICAEW
Finance for the Future
contestant, Econet Wireless
55 A day in the life Founder of
Pinkster, Stephen Marsh
60 Member profile

“The Royal
Household needs to
be run in a business-
like way, but it is not
a business” 60

24

62
TECHNICAL
75
LIFE

62 Technical updates Key 76 Transformational technology

developments for the profession
66 Making Tax Digital
68 UK GAAP What happens after
Brexit and is there an appetite
for change?
70 Practice Q&A Find the answers
to your burning questions
72 Disciplinaries
What do today’s gadgets and
toys tell us about the tech trends
shaping the world?
80 Restaurants Three establishments
where it’s OK to do it yourself
82 Life after work Andrew Fane

ECONOMIA MARCH 2018 5

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Take a dip Our news team looks at the meaningful stories
from last month, including innovation at the Winter
Olympics, the future of petrol stations and a Deliveroo IPO

In case you missed it

Paint it black
Unsurprisingly, the
2018 Winter Olympics
in PyeongChang,
South Korea,
were a display
of technological
brilliance as well as
physical endurance
(ignoring the cyber
attack during the
opening ceremony).
A record-setting 1,218
drones were used to
recreate the iconic
Olympic rings in
the skies over
PyeongChang. Back
on terra firma, the
so-called “darkest
building on Earth”
was unveiled. The
Hyundai Pavilion is
painted in Vantablack
VBx2, which can
absorb 99% of light
that hits it, making it
look like a black void.
Architect Asif Khan
said it feels as
though you are
being absorbed into
a cloud of blackness
or looking into space.

A TORRID WEEK FOR UNCERTAIN FUTURE FOR CROFTERS TAKE ON ENERGY

GLOBAL STOCK MARKETS
After a turbulent seven days at the
start of the month for the markets,
described by one investor as a
“bloodbath”, stocks did rebound. In
China, it was the smaller-cap stocks
in the Shenzhen Composite, CSI 500
and tech-heavy ChiNext Indexes that
bounced back strongest, despite 342
companies listed in Shanghai and
Shenzhen suspending trading at one
point to seek shelter from the
turbulence. According to Business
Insider Australia, technology,
healthcare, consumer discretionary,
consumer staples and telecoms have
been leading the recovery in China.
PETROL STATIONS
According to the chief executive of
Chargepoint, the world’s largest
charging company, electric cars will
lead to a “deforestation” of inner-
city petrol stations as drivers charge
at home or work. Speaking to the
Financial Times, Pat Romano said
“around town” stations will reduce
once all cars on the road are electric.
The big oil companies are pivoting
in response: Shell has bought
electric charging group NewMotion,
BP has invested $5m in FreeWire to
offer charging at its sites, and
Tesla may open restaurants at its
“supercharger” locations.
GIANTS IN THE HEBRIDES
Staying with energy, more than 200
crofters have objected to proposals
to build a windfarm on communal
land close to Stornoway on the
island of Lewis. As reported in The
Guardian, the crofters want to build
their own development, with the
profits going to the local community,
rather than EDF and Wood Group.
Calum MacDonald, former Labour
MP for the area, said: “We absolutely
believe we can make it work and
that we would be able to borrow the
money for the development. EDF
would not be doing it unless they
believed it would make money.”

8 MARCH 2018 ECONOMIA

 THE AUDIT

Film’s medieval routes How we’ll win Quote of the month

Writing for website The Conversation,
University of York lecturer Lydia
Zeldenrust makes a connection
between Marvel’s new Black Panther
film and medieval romance tales, such
as Guillaume de Palerne and Melion
(one of King Arthur’s knights), where
it was common for humans to take on
the appearance and characteristics of
beasts but still be in control of their
faculties. “The most famous example
is the werewolf. Medieval werewolves
differ from later versions, as they are
often sympathetic heroes rather than
dangerous adversaries... a fusion of
human and animal characteristics
highlighting the potential advantages
of becoming a beast.”
HYUNDAI PAVILION BY ASIF KHAN PYEONGCHANG 2018 © LUKE HAYES, SIM CHI YIN / VII / REDUX / EYEVINE, GETTY IMAGES
Digital news outlet Quartz has
published insights from 50 of “the
world’s most-qualified women” to
contribute to the ongoing discussion
around equal opportunities. Jean
Liu, head of the Chinese ride-sharing
company Didi Chuxing, says: “A
female colleague once said to me that
her male peers plan careers in terms
of decades, but she was not able to do
so because she has to factor in family, Yves Mersch, a member of the
children, and the sacrifices women executive board of the ECB, says
are expected to make along the same tighter regulation of disruptive
timeline. Hearing that made my heart “will-o’-the-wisp” virtual
ache. Cheng Wei (our founder) and currencies should be a priority
I started the Didi Women’s Network
to help women break that kind of “Virtual currencies
mid-career bottleneck.”
are not money, nor
will they be for the
foreseeable future.
Their market share
is small and their
ties to the real
economy... limited.
But this can
change. Regulators
and legislators
should urgently
pay close attention

to mitigating the
potential risks
from the growing
VC business”

PwC HIRED TO EVALUATE

DELIVEROO FLOAT OPTIONS
As reported in The Sunday Times,
the food delivery service Deliveroo,
a poster child for the gig economy,
is considering a stock market float.
It has appointed PwC to evaluate
strategic options, including a listing

6.4m
in either London or New York in the
While teens and young people are ditching next 12 to 18 months. A float would
Facebook for rival Snapchat, the 14-year-old value Deliveroo, which is yet to
social media network can take solace from make a profit, at well in excess of
a report by eMarketer that says its popular- $2bn (£1.5bn), according to one
ity is surging among the over-55s. Its research says 500,000 new over-55s are source. It would also crystallise
expected to join Facebook this year, meaning it will have 6.4 million regular huge fortunes for William Shu,
over-55 users. It’s not just demographics Facebook is grappling with in 2018: Deliveroo’s American founder, and
Unilever is threatening to withdraw its advertising if Facebook fails to commit a host of its venture capital backers
to clamping down on online harrassment and harmful content. in London and Silicon Valley.

ECONOMIA MARCH 2018 9

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 THE
EYEBROW
AUDIT

Former BBC group finance director Beverley Tew talks
about her role as a non-executive director of TeenTech,
which helps to inspire the next generation of scientists
I WAS A NUMBERS GIRL
and training to be a chartered
accountant felt like a natural
progression. I like to think I am
creative as well. My dream job would

As I see it be to invent something really useful

that would change lives.

MY FIRST PROFESSIONAL
CHALLENGE was arriving at the
BBC and realising I was a team of
one with a big job to do and a new
team to recruit.

I KNEW I WANTED TO WORK

FOR AN ORGANISATION that
made something. It had to be in an
industry I cared about and I was
I learned [at the BBC]
lucky to land a great role at the BBC;
that putting time and
effort in to finding I stayed for 18 years and became
the right people, group finance director. I qualified at
and building a great
team is the secret of EY, which I loved for the rigour and
success. One of the training it instilled in me, and for the
team works with me great friends I made. I loved the BBC
still at TeenTech
because it was exciting, glamorous
and challenging but important
and worthwhile too.

TEENTECH IS ABOUT
INSPIRING TOMORROW’S
INNOVATORS, and finding the
next generation of scientists and
entrepreneurs. [The community
interest company was founded by
former Tomorrow’s World science
presenter Maggie Philbin.]
It has never been more important
for the UK to be at the forefront of
innovation as we approach Brexit.
I was asked to join the TeenTech
board by a BBC colleague because it
needed financial and business skills.
But in a small organisation you lend
your hand where it is needed, from
fundraising to judging awards.

THE UK GOVERNMENT’S
INDUSTRIAL STRATEGY
launched last year and is focusing
on investment in healthcare and
medicine, clean and flexible energy
storage, robotics and artificial
intelligence, self-driving vehicles,
manufacturing and materials of the
future, and satellites and space
technology. The ambition is that
research and innovation in these,
MCCABE

combined with business, can unlock

BLOGGS

markets and industries in which the

FELICITY

UK can become world-leading. Our

BYJOE

challenge is the pipeline of talent.

PHOTOGRAPHY BY

We need our young people to see

PHOTOGRAPHY

technology and applied sciences as

a future they can help create as well
as benefit from and enjoy. ○

11
12 JUNE 2017 ECONOMIA
12

I
was reading maths at Durham when I started
thinking about accountancy. I’m numerical
and comfortable in that space and eventually
got a first so it was natural for me. I felt the ACA
would give me a strong foundation in as broad a
range of business as I could be interested in. I got
an internship at Deloitte – I liked the people, the
work, the clients. My enduring memory from
my first year in the profession is the sense of
support and also competition – you need to start
developing much wider skills so it becomes about
relationships, communication, organisation.
Penny Scott-Bayfield has worked for household names including
Deloitte, lastminute.com and Sky. Now at Condé Nast Britain as FD,
she talks about the challenges facing the publishing industry
Tales from the frontline
I went on a secondment to M&S, which partly
triggered my move into industry. It was the first
time I’d experienced preparing the interim
results, the analysts’ presentations, and I enjoyed
immersing myself in one business. So when
the opportunity [financial controller, group
reporting] at Sky came up, an incredibly dynamic
business, I was probably going to learn at an even
faster pace.
The pride you feel working for a strong company
and brand is important. Sky had gone from launch
to FTSE 100 in 10 years, so was aggressive,
ambitious. And lastminute.com had only taken five
years to go from an idea to a FTSE250 company,
and that was an extraordinarily entrepreneurial
environment. You can absorb all sorts of things
wherever you are and they were disruptors with
clear goals. They were energetic, people-based
environments, and that’s where I really thrive.
WORDS BY AMY REEVE. PHOTOGRAPHY BY ANDY LO PÒ
I came in as financial controller at Condé Nast
Britain and have been there 14 years now. I’ve
seen a huge amount of change, which is part of
the reason it’s so interesting. I’m a naturally fairly
impatient person so things have to be moving at a
fair old pace for me to be happy with it. As I came
in I was looking after the delivery of the finance
side: the management accounts, forecasts,
finance operations and the statutory and tax side.
The promotion to the finance director role means
I take complete ownership of the finance side and
sit on the main board. We work closely with the
THE AUDIT
international head office in the US. And I’ve
just finished the Deloitte CFO Next Generation
programme where one can learn a huge amount
about new areas to take on and be involved in.
Our technology decisions are based on
understanding how people engage with and
consume content. So with the younger audience,
for example, Snapchat Discover is an extremely
good platform at the moment. People using that
can then graduate to other social media platforms,
then the brand’s website, then potentially on to
the print product. The huge developing area
has been around data: the insight is incredibly
valuable. We’re seeing great and profitable growth
in digital revenues. In terms of paying for digital
content and how, Condé Nast in the US has begun
exploring that and we’re watching what it does.
The challenge for print is about people’s
time; the portability and accessibility of content.
Having said that, print remains the beating heart
of everything we do. Our brands remain strong
because we’re in this luxury space – there’s the
point around trust, uniqueness, authority and
understanding of the market – so print
advertising remains strong. In terms of the
less happy story, the mass market is very tough
indeed. There are challenges for some of the
more mass market brands out there.
We’re looking at events: we run the Glamour
Beauty Festival, and House & Garden festivals,
and we do Wired conferences and consulting,
working with clients to deliver insight and
innovation from the Wired world. We have Vogue
cafés and lounges and GQ bars. So there’s
interesting brand diversification on several levels.
Condé Nast College is part of Condé Nast
Britain but it’s also a model that has been
successful in China and Spain. The range of
courses we offer, from a 10-week course to a
fashion communication degree and a fashion
foundation diploma, are proving attractive. It
helps that there are diverse options for training
now: you see much greater opportunity and
access. Equally, we’re well aware there are some
huge challenges and you can study anything but
you’ve still got to pay for it. It’s tough, and that’s
a great shame because it’s limiting access to some
extremely bright young people. ○
13
Debate: The principle
that ISPs treat
data and users
ARIAN ATTAR , policy fellow
equally – net
at Public Knowledge
neutrality – is a
“Net neutrality has existed in harmony
with the capitalist world for more
than 15 years. Historically, the Federal
pipe dream in a
Communications Commission (FCC)
has ensured that consumers have
access to a fair and open internet.
Public Knowledge believes the
capitalist world
internet should always be an equal
and open playing field, with no one
entity superior over others. An open
internet begets innovation; start-ups
and small businesses, an integral
part of our society and economy,
require equal access to develop new
ideas, technologies, and services. Not
only did Internet Service Providers
increase investment after the passage RO KHANNA, JAVIER PALLERO,
of the Open Internet Order, but Congressman Latin America policy
start-ups thrived because they didn’t on Twitter lead at Access Now
have to compete with big players by “What if we repealed
paying for fast lanes. Websites have financial regulations
been treated equally in the past and because the large “Net neutrality is a
should be treated similarly in the banks promised that key principle to keep
future, even in a capitalist world.” they wouldn’t engage the internet free and
in the risky behaviour open. Despite its
that caused the many interpretations,
financial crisis? That is the core of the
like what the FCC did.” concept consists of a rule against arbitrary
discrimination in communications. This includes
the possibility of using any protocol, service,
TIM WU, professor application or device, without the need for
at Columbia University, permission from network operators.
credited with coining “It is true that technologies such as the Internet
“net neutrality” in 2003 of Things and the growing use of video streaming
“You may dislike some can put stress on the networks. But the solution
of what has come out should come from permanent investment in
of the internet boom network capacity and on technology research.
— there’s been a lot Traffic management measures should only be
MARIETJE SCHAAKE, Dutch of craziness. But applied when they are limited in time and scope.
MEP writing to the US Congress there is something Such measures should also be transparent and
“The FCC’s decision goes against fundamental about non-discriminatory.
everything we have fought for. We the ability to reach “Net neutrality allows everybody to enjoy the
urge you to stay the course and ask people... that is reach, scalability, and agility that the internet
you to overturn the regulations guaranteed by enables, and is consequently an important tool
passed by the FCC.” net neutrality.” for human development and free expression.”

14 MARCH 2018 ECONOMIA

 THE AUDIT

LETTER FROM FOUNDATION, a collection of women’s rights groups, to the FCC

“We need an open internet so we can organise and

connect for political action and civic engagement;
access vital news and information that is not
available in the mainstream, corporate media,
and ensure women-led small businesses, creative ANDREW
endeavours, and innovations can flourish.” GLOVER, chair
of the Internet
Services Providers’
Association
TIMOTHY KARR, senior
director of strategy at Free Press
“UK ISPs clearly
demonstrate that net
“You expect to connect to any neutrality is not a pipe
website, service or person that is also dream. For a long time,
online. You expect the company that UK providers have
provides you with a connection won’t committed themselves
interfere with your ability to access to preserving net
the content you choose. You expect neutrality through
to be in control of your experience. a voluntary code.
“The principle that protects Ofcom, the UK
these expectations is called net telecoms regulator,
neutrality: the First Amendment of has further assessed
the internet. The internet without the compliance of
net neutrality isn’t really the internet. UK ISPs with tough
Absent net neutrality protections, EU rules finding that
and companies that connect you to ‘there are no major
the web can decide which websites concerns regarding
and applications succeed, and which the openness of the
messages get through. internet in the UK’.
“It will be devastating for vulnerable “Despite this
communities that traditional media MARK A JAMISON, director and professor, commitment and EU
outlets have misrepresented or Public Utility Research Center at the University rules, UK ISPs have
failed to serve. They rely on the open of Florida consistently increased
internet to organise, access economic the speeds that are
and educational opportunities, and available to consumers
defend their rights.” “Net neutrality as a regulatory policy is an idea and businesses and
whose time has passed, if it ever came at all. One we believe that with
of the fundamental challenges to net neutrality is the move towards ever
that it became a rallying cry for a hodgepodge of faster networks (5G
ideas that continually grew in scope, so much and fibre), bandwidth
so that the Obama Federal Communications concerns could
Commission in 2015 couldn’t define what it become a thing of the
really wanted to restrict. past. That said, there is
“And the regulatory restrictions worked against a need to ensure that
the very people they were supposed to benefit: our communications
internet entrepreneurs benefit from a non- networks can support
neutral internet; the regulations appeared to the specialised services
suppress broadband investment; and the that power smart
restrictions made services to disadvantaged cities, connected cars
DHAVAL PARMAR/UNSPLASH, REUTERS

KAMALA HARRIS, California
senator on Twitter
“Keeping the internet free and
open is paramount to ensuring the
gatekeepers of the internet can’t tilt
the competitive playing field. One
website should not be prioritised
over its competitor.”
persons more costly to provide. and other advanced
“Finally, technology is moving beyond net technologies. Our
neutrality: the new generation of wireless members run
technologies have hardwired treating different innovative and
types of content differently; large content successful businesses
providers are bypassing the public internet; and remain committed
and apps, which are inherently not neutral, are to preserving the
growing in importance.” open internet.”

ECONOMIA MARCH 2018 15

THE AUDIT

From the Institute this month: monitoring the UK’s lingering INCLUSIVITY COUNTS
cold, push to promote economics classes in schools, ICAEW ICAEW played host for the first time
to the launch of the 2018 Stonewall
hosts inclusivity index, and the Great Hall’s revamp is revealed Index of top employers – the defini-

ICAEW news
NO COLD CURE IN SIGHT
The UK economy “appears to have a
cold it cannot get rid of”, according to
ICAEW chief executive Michael Izza.
He was commenting on the latest
ICAEW Business Confidence Moni-
tor results that show while business
confidence may have improved during
the first quarter of 2018 (up from -3.4
in Q4 2017 to -1), it remains in negative
territory, where it has been for six out
of the past seven quarters. This, says
ICAEW, is equal in length – but not
depth – to the global financial crisis.
GDP growth is expected to be just
0.3% this quarter, slower than in the
eurozone and other global markets,
while export growth, which has
plateaued at 3.5% year on year, is
expected to stay at this level for the
year ahead. The effect of sterling’s
current rebound and rising commodi-
ties costs are compounding matters.
There is one bright spot: growth in
domestic sales is on an upward trend,
despite the rise in input cost inflation
and a 1% increase in selling prices.
Izza says that the low export sales
growth is worrying if it means that
businesses are not taking advantage
of stronger growth in the eurozone
and the rest of the world. “Companies
cannot rely on demand locally,” he
stressed. “Domestic sales are under
pressure and further interest rate rises
expected in 2018 will turn the screw
on consumers even further.”
Interestingly, London suffered a
huge loss of confidence during Q1.
Usually, the UK capital leads the way
but, no doubt reflecting increasing
fears over Brexit as well as problems
in recruiting skilled workers, its
confidence index has fallen to -12
compared to the UK average of -1. It
is probably not surprising then that
banking, finance & insurance and
property, both of major importance
in London, showed the weakest
confidence among business sectors.
MAKE ECONOMICS LESSONS
MANDATORY
ICAEW has joined up with economics
education charity Economy to launch
a campaign to develop and promote
resources for economic education
within the personal, social, health and
economics (PSHE) module in schools.
The aim is to make economics educa-
tion statutory as a standalone subject.
ICAEW COO Vernon Soare explained
that he wanted to see a higher propor-
tion of young people given the tools,
skills and confidence to question
economic proposals and decisions,
and how these are accounted for.
“Equipping students and all young
people with these skills at school is
vital. We are endorsing Economy
to assist and equip teachers in the
challenge to develop practical and
usable curricula in this respect – so
that students can benefit from under-
standable economics.”
Although it is part of PSHE, econom-
ics has the least time devoted to it in
schools and the fewest resources avail-
able. Over the next two years, the joint
campaign will see Economy provide
thought leadership and sample
resources for basic economics educa-
tion suitable for a classroom setting,
work with the teaching profession
to establish practical and engaging
methods of teaching economics in
school and work towards ensuring
economics education is put on a
statutory basis.
tive benchmarking tool for measuring
progress on lesbian, gay and trans
inclusion in the workplace.
And although it was not placed
in the top 100, it welcomed the fact
that three of the Big Four accountancy
firms, PwC, KPMG and EY, had once
more made it into the list at 33rd, 35th
and 79th respectively.
“Diversity is a powerful force for
good,” said ICAEW vice president
Fiona Wilkinson. “We also know
that businesses benefit from strong
diversity and inclusion policies and
practices that help attract both the
best talent as well as clients.
“I urge member firms to do more
to promote equality and diversity in
the workplace and, whatever their
size, to consider applying to Stone-
wall’s index.”
ICAEW reported that it had moved
several places up the index in 2017/18
and would be taking more action
this year to increase inclusivity for
members and staff.
GREAT HALL, NEW LOOK
Nearly 50 years after being launched
by the Queen Mother, the Great Hall at
Moorgate Place has been given a face
lift. Gone are the wooden panelling,
the Paolozzi tapestry and the metal
sculpture across the windows, which
was lovingly known as “the chastity
belt”. Instead it has been transformed
into a contemporary space with wall
to wall draping, floor length lighting,
AV technology and large projectors
that allow up to three screens to be
used at the same time.
According to ICAEW executive
director Sharron Gunn, the Great Hall
is “a venue that retains an exciting
blank canvas appeal, which means
this is a versatile space that can be
adapted depending on the event”.
The launch of the new look hall
follows swiftly on from the restitu-
tion of the Henry Holiday stained
glass windows that were removed
from the original building to make
way for the Whitfield Tower and
the Great Hall. The four works of
art, which commemorate different
aspects of the accountancy profes-
sion, were rediscovered mouldering
in a barn that had belonged to Led
Zeppelin’s manager, Peter Grant, until
his death in 1995. They now hang in
the entrance to the Great Hall. ○

16 MARCH 2018 ECONOMIA

 M O V I N G YO U R F L E E T F O R WA R D

P11D BIK C02 COMBINED MPG

£35,840- £22,340 33% -25% 173 -115g/km 37.7-64.2

Official fuel consumption figures in mpg (l/100km) for the Ford Kuga range: urban 30.1-58.9 (9.4-4.8), extra urban 44.8-67.3
(6.3-4.2), combined 37.7-64.2 (7.5-4.4). Official CO2 emissions 173-115g/km.
The mpg figures quoted are sourced from offi cial EU-regulated test results (EU Directive and Regulation 692/2008), are provided for comparability purposes and
may not reflect your actual driving experience.
THE AUDIT

Training to be an accountant with ICAEW 8 MARCH CHAIRING AN

is not only shaping careers but also our AUDIT COMMITTEE
This webinar looks at the role
world, argues president Nick Parker of the audit chair in building a

From the top

successful audit committee, and
what the required essential skills
and experience are to ensure the
committee’s effective engagement
with its key stakeholders.

8 MARCH CAN A WOMAN

O
n my travels around the UK and overseas, I am amazed by the ICAEW Have your HAVE IT ALL?
members I meet and the wide range of careers and interests they are say: email Some 35,000 members of ICAEW
Nick at
involved in. Who would have expected that the deputy secretary general president@ are women, yet it appears that very
of UNESCO was one of our members? Yet Getachew Engida, who is credited with icaew.com few are at the top of business. Why?
bringing financial reporting and risk management within the organisation into Several senior professional women
the 21st century, qualified as an ACA with Arthur Young (now part of EY) back will talk about their careers, including
in the 1980s. Likewise the chief executive of Drug Free Sport in New Zealand is the choices they made, the hurdles
ICAEW member Nick Paterson who, ahead of the Commonwealth Games next they overcame, the mistakes they
month, is heavily involved in a crackdown on up to 100 NZ athletes allegedly have seen other women make that
caught by a doping investigation before Christmas. And then there’s Gauri hampered their rise, and what can be
Devidayal who, after training with PwC in the UK, moved to Mumbai and set done to bring about change. Crick,
up the highly successful fine dining Northamptonshire
restaurant, The Table, followed by the
Magazine Street Kitchen, and is now 19,20 MARCH TRAINING
heralded in the Indian press as one PARTNER UPDATE
to watch in 2018 (see the May issue of Interested in becoming a training
economia for an interview with her). partner? This session will cover topics
Gauri, in fact, is one of 11 Indian including routes to membership,
ICAEW members whose entrepre- alternative qualifications,
neurial achievements have been apprenticeships and support offered
celebrated in a new book, Building to ICAEW training offices. It will also
Strong Economies, launched last let you meet other locally-based
December. Interviewees range from training partners. Penrith, Kendal
Lord Bilimoria, of Cobra Beer fame, to
Deepak Parekh, chairman of financial 22-24 MARCH THE
conglomerate the Housing Develop- PRACTITIONER’S
ment Finance Corporation, who was CONFERENCE 2018
also the 2010 winner of the ICAEW Taking as its theme, the trusted
Outstanding Achievement Award and recently appointed London’s international adviser in the digital age, this
ambassador to India by mayor of London Sadiq Khan. The book was put together three-day conference offers a range
by another entrepreneurial ICAEW member, Vandana Saxena Poria. After building of focused technical updates on
BPP Professional Education into the largest training presence in central and issues such as tax, regulation and
eastern Europe, she went on to found, build and then sell Get Through Guides, accounting standards. Cambridge
which publishes material for international professional qualifications, earning
herself an OBE along the way for services to trade and investment. 15 MAY DIGITAL
Building Strong Economies makes for a really interesting read and it’s an idea TRANSFORMATION
that I would like to see replicated throughout our ICAEW communities around the This global virtual conference will
world. The seemingly limitless possibilities offered by the chartered accountancy offer a series of 15 on-demand
qualification is a theme I come back to on a regular basis in my speeches at the webinars ranging from mega trends
many ICAEW graduation events I attend, and is proudly communicated and in the accountancy profession to
celebrated across the pages of economia. Being able to point to inspirational implementing robotics to the virtual
members’ profiles is a fantastic opportunity to encourage our younger members. FD. It will also feature live Q&As
It is also a great way to show young people from whatever walk of life that, if discussing issues, such as staying
they are interested in pursuing a career in business, a good place to start is relevant, managing talent in the
with our ACA qualification. As a profession, we are open to anyone who has digital age, piloting technologies
the required talent and, I believe, we are all the better for it. and new service models.
As Getachew, who grew up in the poorest part of Addis Ababa, says: “My
PHOTOGRAPHY BY DAVID BEBBER

personal story is just another indication that, given an opportunity, many can

Events
make the impossible possible.” ○

18 MARCH 2018 ECONOMIA


Michael
Izza
With growing scepticism of the media, faith in
technical experts is on the rise. It may be time
for business to take responsibility for the data it
handles – and for audit to ensure that it does
A
t the end of January, Edel-
man launched its 2018 trust
barometer and suggested
that the world was enter-
ing a new phase in the continuing
global loss of trust, the fourth in a
series of recent waves that together
are doing much to undermine “the
moorings of institutions”. According
to Richard Edelman, president and
chief executive of the organisation,
the first three arose from: fear of job
losses resulting from globalisation and
automation; the financial crisis and
recession, which “created a crisis of
confidence in traditional authority
figures and institutions while under-
mining the middle class”; and the
effects of massive global migration.
The latest loss of trust involves the
public’s unwillingness to believe infor-
mation and, in particular, the news. As
a result, as the barometer reveals for
the first time since it launched 18 years
ago, media is now the least-trusted
ILLUSTRATIONS BY DAN MURRELL
global institution, scoring under
50% in all but six of the 28 markets
surveyed. This has led to problems
with identifying the truth (59%), a lack
of trust in government leaders (56%)
and distrust in business (42%).
Yet, despite this, the barometer’s
ECONOMIA MARCH 2018
2018 message is not all doom and
gloom. A knock-on effect of our
fear of fake news, it seems, is that
we are beginning to renew our faith
in experts, especially technical
experts and academics (63% and 61%
respectively) but also chief execu-
tives (trust in them has shot up from
37% to 44%). This sudden increase
in trust in business leaders stems in
part from a number of high-profile
individuals taking a public stance on
current issues, like Paul Polman, chief
executive of Unilever, who had placed
the multinational consumer group
firmly at the forefront of sustainable
development, or Dara Khosrowshahi,
the new chief executive at Uber, who
wrote an open letter apologising for
the mistakes the company had made
globally. Interestingly, nearly two
thirds of the 33,000 respondents in
the trust barometer survey now say
they want chief executives to seize the
initiative on policy change rather than
waiting for government to grind into
action. But they also expect CEOs to
rebuild trust (69%) ahead of any other
item on the agenda, including high
quality products and services.
Businesses are also now expected
to play their role as catalysts for
OPINION
change. Nearly three-quarters of
respondents say they trust their
own company to do the right thing
and 64% accept that companies can
seek to improve economic and social
conditions in the local community at
the same time as making profits.
So is this a sign that business has
finally turned the corner 10 years
after the financial crisis? I think we
still have a long way to go and much
to prove. Spectacular crashes like
Carillion will inevitably slow down
the process. But I do believe there
may be a pinprick of light at the end
of the tunnel. And the same applies
to the accountancy profession. One
thing that recently gave me cause for
optimism took place during a panel
session a few weeks ago at the World
Economic Forum in Davos.
We heard that in the light of the
growing demand for regulatory protec-
tion of our data and its use by tech
giants like Facebook and Google, later
this month, a draft set of principles
and rules is to be put out for consulta-
tion aimed at companies that control
large amounts of data: it will be the
equivalent of the General Date Protec-
tion Regulation but at an international,
rather than EU, level. Not surprisingly,
someone from the audience pointed
out that this sounded fine in theory but
how could the powers that be ensure
that companies wouldn’t act in their
own interests rather than those of the
public, and fail to take the principles on
board? “What protection are we going
to see in place,” he asked, “to make
sure that companies will comply?”
The response was immediate: the
companies would need to be audited.
A panel member added that it was
something they would ask a KPMG or
an EY to do. After all, how companies
look after data is just as important an
exercise as financial reporting was in
the last century.
If such a set of principles were to
be introduced, we at ICAEW would be
delighted to contribute ideas on how
it could be done. This is just the sort
of assurance work that we have been
focusing on over the past 20 years and
something non-Big Four firms would
be able to carry out just as well as
their larger peers. It would have the
added benefit of introducing some
much needed competition between
the large firms and their mid-tier
counterparts. ○
Michael lzza
ICAEW chief executive
19
OPINION
Jo
Owen
Next time someone accuses you of
being unreasonable, thank them for the
compliment. If you want to succeed, you
have to be unreasonable – selectively
I
know this runs against the nature
of management theory for the
last 200 years. The Industrial
Revolution grew from the Age
of Reason and Enlightenment. The
earliest movement in management
was called Scientific Management,
which was the application of time and
motion with a human element thrown
in as well. That legacy lasts. Managers
are still meant to be reasonable.
But you cannot succeed by being
reasonable. If Alexander the Great
had been reasonable, he would have
remained as a ruler in a small tinpot
state on the edge of civilisation as
it was then. Instead, he set out to
conquer the entire known world by
the age of 30. He even overthrew the
ancient Persian empire, where he was
known as Alexander the Barbarian for
his destruction.
But we know him as Alexander the
Great. Meanwhile, who can remember
his diligent cousin, Alexander the
Reasonable? The world is not changed
by reasonable people.
20
As a leader, you have to take people
where they would not have got by
themselves. That means you have to
be unreasonable, selectively. If you
are unreasonable about everything
then you are at best a pain, at worst
a psychopath. So what should you be
unreasonable about and how?
There are three areas where you
need to discover your inner dictator:
goals, people and budgets.
If you believe something is impos-
sible, you will always be proved right.
The limit of our ambition is the limit
of what we can achieve. The best
leaders have a profound language
deficiency: they do not understand
the word “impossible” and fail to
grasp the meaning of “no”. They
are ready to stretch for outrageous
goals – putting a man on the Moon; the
dot.coms that start in a garage before
dominating the world; or upstarts like
Ryanair, which push aside incumbents
– these are not the work of reasonable
people settling for reasonable goals.
Leaders know that when you accept
excuses you accept failure. There are
always reasons why costs should go
up, deadlines go back and deliverables
go down. The reasonable response
is compromise, the unreasonable
response is to work out how to get
back on track. This is not about shout-
ing at your team. It is about being
creative, delegating and empowering
your team to find alternatives. If you
are unreasonable about sticking to the
goal, you have to be reasonable and
flexible about how you get there.
Where people are concerned,
leaders can appear to be ruthless.
Ultimately, the mission comes first.
That means you have to have the
right team to get you there. You can
not afford passengers: move them
out. One head teacher hated the
idea of being called ruthless. I then
interviewed her and found that she
had started at her school 25 years
earlier with another graduate. They
became best friends, shared Sunday
lunches and holidays and the children
grew up with each other. When she
became head she realised that the
English department head was a
major obstacle to the success of the
school: the head of English was her
long standing friend. She fired her
friend; the friendship ended and the
school succeeded. The head explained
that the future lives of 1,200 children
came ahead of personal friendship.
What comes first for you: your mission
or your friendships?
Although you may be ruthless about
building the right team, you need to
be highly supportive of the team once
you have selected them. They need to
be confident of your support.
Getting the right budget is as
important as getting the right team.
You can not build a Rolls-Royce on a
Mini budget, however talented your
team may be. As the leader, your
obligation to the team is to set them
up for success. That means you have
to make sure they get the right budget
and access to the right resources.
Negotiate hard.
Managers may be reasonable; lead-
ers often have to be unreasonable. ○
Jo Owen is an author, a keynote
speaker and the founder of eight
NGOs. His latest book is Global
Teams (FT Publishing/Pearson)
MARCH 2018 ECONOMIA

START AT AGE 45
Invest
£ 250K
in a balanced portfolio
(50-50 equities/bonds).
Make total monthly contributions of £700 until age
65. Then withdraw £35k gross per annum.
40
24
YEARS YEARS
With avg UK wealth With a modern wealth
manager the pot provides manager the pot provides
24 years of income. 40 years of income.
Securing an extra decade
of comfortable returns
Rising life expectancy and low interest rates are stirring up a perfect
storm for investors – but a few smart decisions could generate a
sustainable income for an extra 10 years or more in later life
ONE SMART MOVE open to
investors is to choose an investment
vehicle whose costs will eat up less
of their income. According to data
from Numis Securities, the average
UK wealth manager charges 1.8% a
year. The lower fees offered by some
challenger brands could considerably
extend the life of a pension pot.
Research by Netwealth shows that
an investor aged 65 with a portfolio
valued at £650,000 who chose to
draw down £35,000 a year should
expect to see their money last
24 years. But by selecting a more
modern wealth management service,
with all-in annual fees of around 0.8%,
the money should last for 28 years.
Investors who start earlier could
achieve an even longer retirement
in comfort. For instance, a saver who
invests a £250,000 pot at age 45,
goes on to contribute a total of £700
gross a month until age 65 and then
PHOTOGRAPHY BY JOE BLOGGS
retires with an income of £35,000
a year, should expect the money
to last 24 years with a traditional
wealth manager. By using a more
cost-effective, modern investment
manager, however, they should
secure their income for 40 years – an
ECONOMIA JUNE 2017
START AT AGE 55
Invest
£ 425K
in a balanced portfolio
(50/50 equities/bonds).
Make total monthly contributions of £700 until age
65. Then withdraw £35k gross per annum.
34
24
YEARS YEARS
With avg UK wealth With a modern wealth
manager the pot provides manager the pot provides
24 years of income. 34 years of income.
additional 16 years of income.
For an inexperienced investor,
while the difference in annual charges
might appear to be relatively small,
it’s quite an eye-opener to realise
it could provide them with an extra
10 years or more of comfortable
retirement.
Challenger investment services,
such as Netwealth, are able to
keep costs down by combining the
services of qualified advisers and
experienced investment managers
with modern technology. Netwealth
dispenses with the extraneous
aspects of a traditional service such
as wood-panelled rooms, banks of
salespeople and golf days, which
drive up costs to the detriment of the
end investor.
The effect of low charges could
be even more powerful if used with
other strategies for sustainable
saving. An investor could choose to
draw down a little less income every
year, or to adjust drawdown regularly
to reflect the changing value of the
pension pot.
Netwealth also recommends that
investors ask their wealth manager
for the full details on fees – since
SPONSOREDEYEBROW
FEATURE
often the all-in total cost is not fully
disclosed – as well as understanding
where their money is being
invested. This includes looking at
how diversified the investments
are and ensuring the level of risk is
appropriate to an individual’s financial
goals.
MORE ABOUT NETWEALTH
Seasoned leadership team: We
bring a very significant level of
maturity and know-how to wealth
management.
Cost effective: Netwealth makes
use of the latest technology, allowing
the total fee charges to be between
a quarter to one third that of the
industry average.
Comprehensive offering: Our
powerful investment tools help you
to plan for a variety of financial goals,
including regular income, significant
outgoings and pension drawdown.
Investments can also be set up with
the full suite of pension/SIPP, ISA
and JISA wrappers in addition to
general investment accounts, with the
ability to automate future tax efficient
investing.
Professional advice: Our qualified
investment advisers can provide you
with advice on how best to invest
should you wish to speak with them.
Network benefits: The Netwealth
Network allows clients to share the
benefits of the service with their
family and friends, with fee rates
based on the combined amounts
invested within the Network.
Security: Security is a critical part of
the Netwealth service. All client assets
are separately held in custody and
ring fenced, and clients access their
data via a dual factor authentication
process.
Find out how we can help with
your pension and investments at
netwealth.com or call 020 3795
4784 to book a free consultation.
Note regarding the infographic: Average Wealth
Manager fees are 1.8% (source: Numis Securities
research) and 0.8% for a Modern Wealth Manager
(source: Netwealth Investments). Based on a
stochastic model with an assumed average return
of 5.3% gross per annum for a balanced portfolio
of equities and bonds. Expected duration of the
pension pot is based on the median outcome
across 10,000 scenarios.
Netwealth is authorised and regulated by the
Financial Conduct Authority.
Remember that when investing the value of your
investments may go down as well as up and that
your capital is at risk.
47
G
overnment has high hopes
of the digital revolution –
with good reason. It could
help improve the UK and
transform the way government and
politicians interact with the public.
But they need to counter the threats
of this disruption on workers and the
communities that lose jobs.
One of the hardest tasks facing
government is working out how to
respond to new technology. In theory,
revolutions in transport, medicine,
and in handling data could give a
long-sought boost to UK productivity.
In turn, that could boost the wages of
those in work. But it would do this
only if it also made some jobs redun-
dant. The kind of jobs under threat
range from lorry drivers to account-
ants, including many in government
departments and the public sector.
Working out how to help those people
gain new skills and find new work is
a formidable challenge.
At the same time, ministers want
to improve the way that government
Bronwen
Maddox
Digital solutions could be the answer to key
problems for government ministers looking
to more effectively engage with the public –
but at a price: jobs. So what can politicians
do to avoid the potential traps of raising
productivity by embracing technology?
22
connects with the public by “doing
government better”, such as offering
driving licences, passports, and other
documents online. These issues rank
as some of the most important facing
government, and would be much
more prominent if ministers didn’t
have Brexit to grapple with.
Judging the impact of new technol-
ogy is a curious battle, fought out in
words, but which will be decided by
innovation and shifts in behaviour
that cannot be foreseen. There is a
well-established school of “techno-
pessimists”, of which the US academic
Robert Gordon is the best known. He
argues that for all the talk of the digital
revolution, it will not yield the surges
in productivity seen previously. The
best is in the past, he maintains.
That can only be judged in retro-
spect. What is clear is that parts of
the digital revolution are only now
beginning to bear fruit, such as
personalised medicine and using
genetic analysis to target drugs at
those who will benefit. It includes the
transport revolution of autonomous
(and less polluting) vehicles. Beyond
these are the “unknown unknowns”
– innovations we cannot foresee.
The benefit may well be to boost
productivity in parts of the economy.
For a decade – arguably before the
financial crisis – the UK’s productivity
has failed to grow, with the effect of
depressing real wages. There has been
a torrent of analysis on the causes.
Andy Haldane, chief economist of the
Bank of England, has argued that bad
management (and failure to innovate)
in many companies is to blame, partly
concealed in the aggregate figures by
very good management in some.
Ministers – with some justification
– home in on the need for more techni-
cal education, infrastructure, housing
and investment in the regions to try
to crack the pattern. These are targets
that many governments for decades
have chosen, though. There are finally
some signs, with new T-levels for tech-
nical education and with more focus
on regional infrastructure, that some
of these sticking points are yielding.
It is clear, though, that governments
should give more thought to commu-
nities or workers left stranded by the
shift in technology. The struggles of
the south Wales valleys 30 years after
the closure of mines is one example.
The 2016 academic paper The China
Shock: Learning from Labor Market
Adjustment to Large Changes in Trade
covers another. The shock the paper
was looking at was the opening up
of trade with China, but its point
goes beyond that: politicians cannot
assume, as economists are prone to
do, that people will easily retrain and
gain new jobs.
As well as countering these effects,
governments hope to make the best of
the digital revolution to better engage
with the public. Politicians talk of
“crowd-sourcing” manifestos. For
instance, Matt Hancock, secretary of
state for digital, culture, media and
sport, has created a new app (called
Matt Hancock) for people to follow
him. Others simply want to make
dealing with the government, whether
in tax, benefits, housing, births or
deaths, simpler and less stressful.
There are real opportunities. But
there are also huge pitfalls, which is
why the digital revolution will demand
ever more time from government. ○
Bronwen Maddox is director of
the Institute for Government and
a commentator and broadcaster
MARCH 2018 ECONOMIA

Oxford
Economics
After a sudden spell of market
volatility, Oxford Economics assesses
the macro consequences
T
he recent bout of market
volatility might not have
surprised anyone who looks
at asset price movements
on a daily basis, but the melt-up-down
was disorderly and violent. As well as
captivating millions of casual investors
it also gave pause for thought: could
the long, smooth ride be over?
We find it unlikely that this market
episode will be associated with a
sustained economic downturn. The
ingredients are inconsistent with that
most fearsome of scenarios in which
inflation picks up sharply while the
economy stagnates. In the unlikely
event of a sustained market slump,
the Oxford Economics model suggests
a 10% change in stock prices reduces
the level of G7 GDP by around 0.3%
on average after two years.
This market reversal is quite a
severe one – of a similar magnitude
to other tantrums and episodes since
mid-2013. Nevertheless, our view is
that the worst-case scenario of a
sustained market rout with major
global macro consequences is quite
unlikely. All the tantrums and market
episodes of recent years have petered
out quite quickly, and it is our view
that this one will probably take a
similar turn.
The key common theme for such
an episode to turn into a sustained
bear market with strong macro
consequences is the realisation of a
fundamental economic weakness and/
or balance sheet vulnerabilities.
What might make this period of
weakness infect the global economy?
The current episode brings to the fore
a tail risk that has haunted markets
ECONOMIA MARCH 2018
and the global economy for several
years. What if central banks have
to respond to higher inflationary
pressures, with limited offsetting
good news on output? Indeed, our
forthcoming note will argue that the
movement in bond prices is about
changed expectations of policy, since
implied inflation expectations from
swaps have moved less than real rates.
But we do not see this current
reversal as consistent with such a
fearsome scenario. Rather, we see
markets, especially in the US and
parts of Asia, as having entered the
stage of euphoria often seen during
extended late-cycle rallies driven in
part by speculation about the impact
of tax reforms in the US.
There are several reasons why the
length and impact of this reversal will
be limited. Even after recent falls,
global equities are just 1% down,
year-to-date. The strong upward
momentum in the global earnings
cycle is not a backdrop for a large
bear market in global equities. And the
latest earnings season in the US shows
signs of earnings per share (EPS)
growth acceleration, with 261 S&P500
corporations having reported earnings
growth of around 15%. We are not
seeing a rout in USTs (United States
Treasury). Yields increased from 2.4%
at end-2017 to a peak of 2.84% on
2 February, but have currently
dropped back to 2.7%. Notwithstand-
ing strong US earnings data, we see
inflation risks, if anything as balanced
or even skewed to the downside.
Global macro indicators suggest
advanced economy expansions can
mature further. If the stock price
OPINION
slump risks putting a major dent in
growth there is scope for Fed action to
support the economy by slowing down
the pace of policy tightening. Our
assessment of pockets of credit risk
suggests contagious vulnerabilities
are nothing like as severe as in the
mid-2000s.
What could happen in an (albeit
unlikely) negative scenario is this:
consumption-wealth effects. Our
recent analysis suggests a 10% change
in stock prices alters the level of GDP
in the G7 countries by around 0.3% on
average after two years. Investment
and productivity recovery would
be choked off. The low levels of
uncertainty that have been boosting
the global economy would disappear.
The dollar could be driven higher by
safe-haven flows, limiting growth in
world trade. And in the worst-case
scenario, balance sheet weaknesses
could be exposed, for example, the
weak debt and fiscal positions in
governments including Italy and some
emerging markets.
We have previously run a model-
based global scenario in which
financial market turmoil leads to
world GDP declining by 0.4% in the
first year after a shock and 0.7% in
the subsequent year. In that scenario
US equities declined 18%, and UST
yields declined 1.1% from the peak. ○
Gabriel Sterne is head of
global macro research
oxfordeconomics.com
23
 T
here are a number of
technology hubs around the
world where entrepreneurial
start-ups and venture capital-funded
businesses flourish, in part due
to the networks of like-minded
businesses and people. Silicon
Valley is perhaps the most obvious
example, but there are plenty of
others, including major cities such
as London, Cambridge, Berlin,
Shenzhen and Vilnius.
The emergence of these hubs
is often haphazard, although
governments can help to encourage
their development. Ross Fabian,
partner and head of technology at
accountancy firm HW Fisher, points
to Silicon roundabout in London
as a good example. “Britain was
probably one of the first countries
24
to jump on the tech bandwagon,”
he says. “But London also has a lot
of natural advantages over other
places in Europe; it’s the centre
of the finance world and it has the
infrastructure, the policymakers
and the talent pool. The tech world
is particularly American-led and
speaking the same language also
has a definite advantage.”
A recent survey by London &
Partners revealed the UK is the
leading European destination for
Silicon Valley investors, attracting
a record $1.13bn in the first nine
months of 2017.
Frazer Bennett has started up
three technology businesses in
his home city of Cambridge over his
career, and is currently chief
innovation officer at PA Consulting,
MARCH 2018 ECONOMIA

helping advise others starting up.
He believes there are three main
factors common to creating the
kind of environment seen in
Cambridge, or other UK cities such
as Manchester, Bristol, Edinburgh
and Oxford: technical talent and IT;
commercial ambition and market
vision; and capital.
“Cambridge has those three in
spades,” he says. “But it is absolutely
Darwinian in its emergence, and
that’s really hard because many
people want to replicate what
ILLUSTRATION BY NEIL STEVENS
Cambridge has. I have lost count
of the number of visitors who have
come to my lab from across the
world and tried to understand how
it works. It’s really hard to paint
that picture, other than to say ‘we
don’t really know how to bake the
ECONOMIA MARCH 2018
cake but we know you need these
three ingredients’.”
Sometimes government
intervention can stifle the
entrepreneurial elements that are
an important part of any hub,
believes Richard Traherne, chief
commercial officer at Cambridge
Consultants. “In Asia the mantra
tends to be more of an instruction
to the community to create a
cluster, particularly in Japan where
they’re very hierarchical,” he says.
“That doesn’t work because you
can’t instantly switch on a cluster
because of this nurturing effect.”
He also gives the example of
Singapore, where governments
have attempted to create a link
between academia and industry,
with limited success. “Because
CLUSTERS
Technology hubs can
bring investment, jobs and
talent to a region, but their
development cannot be
forced. Nick Martindale
looks at the ingredients for
success, and the challenge
of spreading the wealth
these vehicles are well funded they
don’t have an appetite, which you
need in a start-up environment,” he
says. “It’s generally recognised in
these regions that these things
aren’t particularly successful, and
people are taking a step back and
beginning to rely more heavily on
highly talented individuals and
initial successes to try to nurture
that in different ways.”
Europe has traditionally lagged
behind the likes of Silicon Valley
and Shenzhen, but is now starting
to catch up, says Gianpiero Lotito,
founder and CEO of Italian firm
Facilitylive and a founding member
of the European Tech Alliance.
“What makes Europe so different
is that its growth is due in part
to private and venture investor-
25
financed deals, while Silicon Valley’s
early growth was supported by the
government,” he says. “We are now
seeing Europe’s tech hubs emerging
in unexpected places, far beyond
the early hotspots of London, Berlin
and Stockholm.”
He’s currently involved in
promoting growth and innovation
in the UK and Europe through the
Small Valleys initiative; attempting
to develop a network of small
technology clusters based around
prominent academic institutions,
which he hopes will eventually rival
Silicon Valley. “It is possible to
create a multitude of small valleys,
where digital innovators work
in conjunction with students,
entrepreneurs, young skilled
professionals and vibrant local
institutions,” he says. “If given the
chance to develop and expand, it
will pave the way for European
technology companies to pursue
opportunities that would have been
inconceivable a few years ago.” The
first such hub is currently being set
up in Pavia, near Milan in Italy.
S
trong academic backing has
already proved pivotal in
helping Israel develop
into one of the world’s leading
technology hubs, in particular
through Technion, the Israel
Institute of Technology based in
Haifa. “We put a lot of emphasis on
making sure that the technologies
developed by our faculty students
or alumni eventually make it to the
market,” says Benjamin Soffer,
26
manager of T3, Technion
Technology Transfer, which has
a portfolio of 90 businesses,
including 10 that have floated.
“Our philosophy is not to
maximise the terms of each and
every deal but rather to maximise
the number of deals. We believe
that most technologies leaving
academia are not ready to be taken
by the big companies, so we view
ourselves as a tug boat in a big
harbour, to make sure that the
technologies that are developed
here find their way out as quickly
and effectively as possible.” The
landscape in Israel is also helped by
a strong entrepreneurial culture – in
part due to the relative lack of major
international businesses snapping
up top talent – and a favourable
environment to raising capital.
One of the challenges facing any
technology hub, however, is to
ensure the benefits that result filter
through into the rest of the country,
and the wider economy; something
Silicon Valley, for instance, has
struggled with. “Even in the nearby
cities there are many poor people
unable to benefit from the success
of the cluster,” points out Dr Kieron
Flanagan, senior lecturer in science
and technology policy at Alliance
Manchester Business School. “And
visit an ex-mining town in Ohio and
ask residents whether the success of
Silicon Valley benefits them.”
This is an issue many hubs
face, including Cambridge, says
Traherne. “One of the challenges
we have is that success breeds other
issues, such as road infrastructure
and stresses on housing. That’s
something in the UK that we’re
having to deal with, and which
we’re not doing at a sufficient rate.
One of the softer aspects is that
clusters must exist in a place where
people want to work.”
B
ut often investments in
one area will spill over into
another further down the
line, helping to spread the benefits
over a larger geographic area. The
Isle of Man, for instance, initially
built up strong finance and
telecommunications sectors, which
later saw it emerge as a hotbed for
e-gaming. Now, the crown
dependency is rapidly developing
as a cluster for firms operating in
and around blockchain.
“We have more than 20
businesses from this space now
established on the island,” says
Brian Donegan, head of e-business
operations for the Isle of Man
government. “The Isle of Man was
the world’s first jurisdiction to
introduce a registration and
oversight environment for digital
currencies. We’re expecting to see
this sector grow very significantly
with the creation of a number of
companies that will generate
employment.” In all, around 30%
of the island’s GDP now comes from
e-business, whether traditional ICT
or e-gaming.
Traherne, meanwhile, points
to the role that larger businesses
entering hubs can play in helping
to grow clusters and extend their
geographic remit. “That could be
direct start-ups or offshoots of
large, successful technology
companies of 20 or 30 years,” he
says. “In the UK you could look
at the likes of Nortel and how
organisations have developed
around them, and talented
individuals then spinning
something else off and starting
something up.”
The economic benefits of
successful hubs, however, will
spill out in much the same way as
happens with any other thriving
industry, points out Soffer. “In
Israel, the high-tech industry
directly employs maybe 200,000
people,” he says. “With indirect
employment, that probably comes
up to about 800,000 out of a
population of about 8 million, so
MARCH 2018 ECONOMIA

about 10%. But there is a spillover
effect because this 10% go to
restaurants and to hairdressers,
and travel and buy apartments and
other things. It’s definitely a major
engine that fuels the economy.”
In the UK, the Industrial Strategy
emphasises developing new
technologies, pledging to invest
2.4% of GDP in research and
development by 2027, raising the
prospect of £80bn of additional
investment in advanced technology
over the next decade. But sharing
the benefits around the country
will not be easy, warns Flanagan.
“It’s striking the extent to
which sectors that traditionally
used to be in a number of mini-
clusters around the country, such
as pharmaceuticals, are becoming
more highly concentrated in
London and the south-east,” he
says. “The new Industrial Strategy
presents a welcome, tentative first
step towards starting to engage with
this agenda, but it remains to be
seen whether the government really
has the motivation, resources or
capability to address the dominance
of the south-east.”
Bennett also welcomes the focus
on technology in the Industrial
Strategy, but believes the sector
needs to be able to thrive on its
own. “If we get it right we don’t
need significant amounts of capital
investment from the government,”
he says. “We want the market to
decide what success is; tax
incentives are more attractive than
capital investment because we can
attract capital investment from
private equity or other sources.”
In future, other hubs may emerge
to challenge the more established
ones. Technology investment firm
C5 Accelerate recently chose
Bahrain as a focus for an accelerator
programme, seeking to provide
technology firms with support and
capital to get established, on the
back of strong government support
and access to investors.
“The government incentives are
based around making the whole
economy prosper from the
introduction of these start-ups,
including having offsets for hiring
local employees,” says Eva
Dimitriadis, chief operating officer.
“These are the sorts of things that
would make a start-up choose
Bahrain over, say, the UAE.
Anything governments can do
ECONOMIA MARCH 2018
CLUSTERS
“One of the challenges we CONCEPTION
TO COMPLETION
have is that success breeds Chartered accountants
other issues, such as road have an important
infrastructure and role to play in advising
technology firms on
stresses on housing. That’s how to set themselves
something in the UK that up to attract investment
and take advantage of
we’re having to deal with, tax breaks.
and which we’re not doing Ross Fabian leads
the technology practice
at a sufficient rate” at accountancy firm
HW Fisher, a division
created in response to
a growing requirement
from clients.
“We can help them
raise money and with
government incentives
such as the Enterprise
Investment Scheme
around tax, employing individuals and Seed Enterprise
or the ability to incorporate quickly Investment Scheme,
makes it much easier for start-ups.” which are very good for
The firm also operates a similar both the company and
scheme in Washington, and is the investor,” he says.
considering South Africa as a Establishing enterprise
possible future destination. management incentive
schemes for staff is
I
n Asia, Indonesia is also also often required, as
starting to attract investment, start-ups seek means to
with some high-profile enable employees to
start-ups including Go-Jek, share in their success,
Tokopedia and Bukalapak. “Most often in place of a
of all big cities in Indonesia are now premium salary.
covered by high speed internet, Once businesses
although ecommerce still only are up and running,
contributes 2% to overall trade,” maintaining investor
says Deny Poerhadiyanto, head relations is vital. “Most
of Indonesia at ICAEW. “More technology businesses
investors are pouring money into grow in stages with
Indonesian start-ups, but it’s still A and B rounds
too early to expect them to of funding, so it’s
succeed.” Government backing important to make sure
means China is likely to remain investors come back
the leading technology hub in the and invest in the next
region, she adds. of funding,” he says.
Yet technology businesses Advising
operating out of less established entrepreneurs on how
locations – Malaysia and Kenya are to exit businesses
also growing – could prove attractive is also essential,
to investors, points out Dimitriadis. including making
“The places that thrive are where sure the company
it’s affordable for start-ups on structure is such that
shoestring budgets to operate, they will qualify for
where there is actually a technology entrepreneurs’ relief
hub and where there is potential for when they sell.  
investment,” she says. “You can buy
some really interesting and
sophisticated companies in places
like Hungary or eastern Europe.
If that same company had been
born in Silicon Valley the
valuation would be triple.” ○
27
TOP Seeking to uncover what makes a technology megacorp,
Jo Owen weighs up management strengths among the
leaders of the world’s IT giants

IN TECH

Last year, economia assessed the

leaders of the main UK political
parties. Using the same criteria –
vision, motivation, honesty and
integrity, and decisiveness – we are
now rating the leadership qualities
of the global tech titans. These
criteria represent what employees
expect of a leader. You can use
them to rate yourself, if you’re
brave enough...

28 MARCH 2018 ECONOMIA


Vision
Setting a direction is not just
about allocating resources and
fine-tuning the machine.
Leaders take people to where
they would not have got to on
their own. The vision should
convey hope, clarity and
certainty. All of which makes
this a high bar to jump.
Honesty and integrity
This is much more than
morality. It is about building
trust with your team. A leader
who has no trust has no team
and probably has no business.
Trust is hard to earn but
extremely easy to lose.
PHOTOGRAPHY BY JOE BLOGGS
ECONOMIA MARCH 2018
LEADERSHIP
Clockwise from left: Apple CEO Tim Cook;
Dongjin Koh, president of mobile
communications at Samsung Electronics,
and Ginni Rometty, IBM CEO
Motivation
The good news is that 70% of
leaders rate themselves well
on motivation. The less good
news is that only 34% of their
followers rate their leaders
well on motivation. Although
there is an entire industry
devoted to motivation, it is
as elusive as ever.
Decisiveness
A good way to demoralise staff
is to make decisions slowly and
then change your mind. The
best leaders have a clear
direction that lets them make
quick and cogent decisions.
Crises and scandals are a
wonderful opportunity for the
best leaders to step up and
show what they are made of –
can they act decisively or not?
29
Having established the rules of the game, it is time to introduce
the runners and riders in the 2018 tech titans leadership race –
the CEOs of five of the largest global technology firms

IBM
Ginni Rometty

Apple
Tim Cook

Microsoft
Satya Nadella

Alphabet
Larry Page
(Google)

Samsung
From left to right:
HS Kim, Dongjin
Koh, Kinam Kim

30 MARCH 2018 ECONOMIA

 LEADERSHIP

Alphabet Inc, which Apple’s 2018 Q1record- IBM’s 2017 Q4 revenue of Microsoft Corp announced Despite leadership issues
includes Google, posted breaking $88.3bn revenue $22.5bn strengthens its $28.9bn revenue (a 12% and the fire-prone Galaxy
revenues of $32.3bn for proves consumers remain position as the world’s increase) for the quarter Note 7 smartphone,
2017 Q4. CEO Larry Page loyal to the brand, leading enterprise cloud ended 31 December 2017. Samsung Electronics
says: “In the technology particularly its iPhone. provider, says Ginni CEO Satya Nadella says posted KRW65.98trn
industry you need to be CEO Tim Cook says: Rometty, IBM chairman, “investments in IoT, data, ($61.54bn) in consolidated
a bit uncomfortable to “iPhone X surpassed our president and chief and AI services across revenue driven by the
stay relevant” expectations since it executive officer the cloud” will help to components business
shipped in November” accelerate growth

The race could be total chaos: it is Vision

not entirely clear who the runners
are or should be. Samsung wreaks
havoc by having three (newish)
co-riders or co-CEOs, divisional
heads Kinam Kim, HS Kim, and
Dongjin Koh. The previous big boss,
Jay Y Lee, was sent to prison for five
years on bribery and corruption
charges. So anything could happen.
The Alphabet runner is slightly
clearer. Larry Page is CEO of
Alphabet, but 99% of Alphabet’s
revenues come from Google, where
the CEO is Sundar Pichai. Page can
only succeed if Pichai succeeds, so
either could claim to be the rider.
Behind the chaos at the starting
line, there is a clear theme. The
original founders are making way
for the next generation of leaders.
If the race had focused on the
founders, it would have been a
battle of planet-sized egos and
ambitions. Steve Jobs and Bill Gates
are still better known than Pichai,
Nadella and Rometty, let alone
the Samsung Three. This means the
nature of the competition is
changing. It is not about evaluating
the genius of individual leaders who
bend the world to their will; it is
about evaluating the leadership
capability of both the individual
and the firm in which they operate.
This competition is no longer an
individual endeavour, it is a team
sport. That changes everything,
and it reflects leadership as it now
stands. Increasingly, leadership is
about teams, not characters.
EYEVINE, GETTY IMAGES
The first part of the race is to see
if the riders can set a direction,
preferably one which goes the right
way. It is possible that each of the
leaders believe that they are setting
an exciting new direction for their
firms. But from the outside, none of
them seem to pass this test. They
are not taking their firms where
they would not have got by
themselves. Instead, they are all
continuing along a legacy path they
inherited or following the market.
Alphabet
At least 99% of Alphabet continues
to do what it has done very well for
the past 20 years. Google “organises
the world’s information and makes
it universally accessible and useful”
and monetises the proceeds
through paid search. Larry Page
wants to change this mission
statement to reflect his desire to use
information to change the world.
Apple
Steve Jobs was said to have a reality
distortion field: he changed reality
within Apple and beyond. Apple
blossomed from PCs to tablets to
phones to its walled garden of
apps, software and music. Tim
Cook has essentially maintained
that heritage: part of the heritage
includes the much-hyped events
when the latest gadget is unveiled.
Both the direction and the
Microsoft
Microsoft is still doing what it has
traditionally done – dominating the
world of desktop operating systems.
Three-quarters of its profits still
come from Windows and Office.
Just before Nadella became CEO in
2014, his predecessor Steve Ballmer
launched Azure, Microsoft’s entry
into cloud computing. Nadella
continues to push this. He follows
the direction he inherited.
IBM
Last year Ginni Rometty, who is not
only CEO but chair and president,
announced: “The IBM Cloud is the
platform for the next era of
business.” This is not quite
revolutionary: Microsoft and Google
are also betting on the cloud, but
all three are way behind Amazon.
IBM is not making the market, it
is following. Elsewhere, Rometty
continues with IBM’s long standing
push into AI (Watson division) and
professional services (PwC
acquisition). Follower, not leader.
Samsung
Samsung is the best argument you
can find against having a vision.
Despite the chaos of leadership
changes over the past year, the
Samsung machine continues to
motor along nicely; it continues to
innovate and maintain strong
positions in phones, chips and

With the rules clear(ish) and the
riders clear(ish), let the race
commence. There are four stages
before the tape is crossed.
innovation cycle remain the same.
consumer electronics. Last year its
share price doubled. Who needs
leadership or vision when you have
a machine that runs itself and the
chip cycle is in your favour?

ECONOMIA MARCH 2018 31

 Honesty and integrity
At first sight, this race stage divides
cleanly between winners and losers.
Samsung managed to lose their CEO
to a five-year prison term: fail.
In contrast, Tim Cook had the
integrity and courage to come out
as one of the first gay CEOs. Ginni
Rometty is a frequent and powerful
advocate for career women.
Google’s code of conduct under
Page has long been “don’t be evil”,
which is a good start. So that would
seem to sort the field into demons
(Samsung) and angels (IBM, Apple
and Google) with Microsoft
somewhere in the middle.
But honesty and integrity is not
just about your external face. It is
about how far your team trusts
you and wants to work with you.
Normally, low executive turnover is
a good sign of a team committed to
working well together. In the tech
industry, low executive turnover
could be a sign of ambitious
individuals who are determined
to stay and cash in their stock
options. It is hard to abandon
a $20m payout.
Given the opacity of this
challenge, we will let them all
pass the team trust test.
Top: Satya Nadella, CEO of
Microsoft Corp
32
Motivation
Fortunately, there is data for
how motivated people are at the
tech titans. Unfortunately, it is
contradictory. Payscale surveys of
staff for job satisfaction should
correlate broadly with motivation.
As an acid test, the research also
measures average job tenure,
therefore people who enjoy their
job should be less likely to leave.
An impressive 89% of Google staff
report high job satisfaction, but
average job tenure is only two
years. At the other end of the scale,
just 59% of IBM staff report high job
satisfaction, but their average job
tenure is six years, despite
reporting far higher job stress levels
than at Google. Apple and Microsoft
sit between these two extremes –
the passion of Apple fanboys is not
universally reflected by Apple staff.
The reality may be that Google
employees have more marketable
skills, are younger and considerably
more willing to progress their
career by moving.
Once again, the outlier is
Samsung. It has a job resignation
rate among Korean staff of just 5%.
When Koreans join Samsung they
stay, and that is no accident.
Samsung is proud of its “hybrid”
management system, which mixes
Japanese and Western management
approaches, and it works hard to
foster deep loyalty within the firm.
The motivation leg of the
leadership race teaches us that
motivation is not just about the
charisma of the leader. It is about
creating a system that fosters both
job satisfaction and loyalty. The
machine is more powerful than
one person, even the leader.
MARCH 2018 ECONOMIA
 LEADERSHIP

Below: Larry Page, Google

co-founder and CEO
“Normally, low executive turnover is a good sign of a
team committed to working well together. In the tech
industry, low executive turnover could be a sign of
individuals determined to stay and cash in their stock
options. It is hard to abandon a $20m payout”

Decisiveness Conclusions

Crises are a great opportunity All the tech titans had charismatic once said: “I try to buy stock in
for leaders to show that they are leaders who changed the course of businesses that are so wonderful
decisive. As Tim Cook learned from their industry when they started. that an idiot can run them. Because
the Apple Maps fiasco, decisiveness Samsung flourished under its highly sooner or later, one will.” A good
is a real test, and led him to ask: charismatic leader, group chairman business model makes an average
“Do you have the courage to admit Lee Kun-Hee. But success no longer leader look great; a poor model
that you’re wrong?” Decisiveness resides with the genius of the humbles the best.
requires bravery. founder: success resides in the Looking at the tech titans here,
Samsung showed how to be business model their founders it is hard to escape the conclusion
decisive in a crisis when its Galaxy created. That explains the success that they have all reached middle
Note 7 battery started catching fire: of Samsung in the absence of a clear age. The dynamic leadership of the
it issued an immediate recall leader. A weak business model founders has been replaced by the
costing $5.3bn and set up a lab with explains why IBM has languished steady management of the legacy
500 staff to work out what caused under Rometty: its share price has they created. So the winner is…
the problem. That is painful stagnated since she was appointed steady management of a good
decisiveness. in 2012, while the S&P has doubled. business model, which beats a
Google and Alphabet make a Legendary investor Warren Buffet charismatic leader on most days. ○
virtue out of making mistakes: they
believe the mantra of “move fast
and break things”. That speaks to
highly decisive cultures. But it also
speaks to an arrogant “change the
world” culture, which is surprised
when it is fined $2.7bn by the EU
anti-trust authorities.
Rometty has shown decisiveness
in reducing headcount by 50,000
under her tenure, but against 22
quarters of declining earnings, that
may be less about leadership and
more about survival.
Microsoft probably lags on this
leg. It has a history of missteps:
Vista, Zune, Nokia, slow into search
engines. It may not move fast or
well, but it has all the determination
of a three-legged donkey in pursuit
of a carrot. Or as Nadella put it: “To
be a leader in this company, your
job is to find the rose petals in a pile
GETTY IMAGES

of shit.” Microsoft finds the former,

but only after wading through the
latter, much of which is self-made.

ECONOMIA MARCH 2018 33

 Getting
technical

F
David Adams examines intech can refer
what the emerging to almost any
technology
financial technology used to provide
services sector and its financial
wave of innovations services.
Confusingly,
means for consumers, the technology
businesses and the companies developing new digital
accountancy profession financial services may also be called
fintechs. And it incorporates other
forms of tech, such as insurtech,
paytech, regtech and wealthtech.
Essentially, it’s one segment of a
wave of developments based on
using digital technology to speed up
back office processes and enhance
products and/or services in any
industry or the public sector.
There is a strong desire for better
financial services, in part because
so many consumers and business
leaders are used to accessing other
online services quickly and easily
by smartphone and computer. And
they are much less tolerant of the
bureaucratic delays associated with
conventional banking, investment
transactions or insurance claims.
“Outside financial services,
consumers have a fantastic online
experience,” says Murray Raisbeck,
global co-leader of the fintech
practice at KPMG. “They now have
high expectations of an online
customer journey and the financial
sector probably has the biggest gap
between the experience customers
want and the experience they get.
Fintech is bridging that gap.”
New entrants and technology
developers are trying to do this by

34 MARCH 2018 ECONOMIA

 FINTECH

Starling Marketplace feature. Similar initiatives are sure to be

offered by other new entrants and existing banks in the UK as
a consequence of the Open Banking initiative, which launched
in January. Open Banking means customers can now authorise
multiple financial services providers to securely access their
bank accounts, to help them find and use best value services
from other providers and/or to gain an aggregated view of their
finances. The initiative is based on the building blocks of many
fintech services, Application Programming Interfaces (APIs),
which allow IT systems to communicate with each other.
focusing on a niche rather than

O
offering the full range of financial pen Banking may offer a faster entry point into
services. Many also offer more financial services provision for new players and
personalised services based on data incumbents, says David Lyford-Smith, technical
science and machine learning. manager in the IT Faculty at ICAEW. He points out that
Some are building partnerships budgeting apps for consumers are already popular, even
with incumbent providers who though they are difficult to use without effective services
invest in, acquire or outsource aggregation. “When it becomes possible to have a budgeting
services to them. Santander, for app that you can provide with appropriate access to your
example, has InnoVentures, a banking records so it can recommend that you switch to a
$100m venture capital fund which particular account, or use a particular credit card – that’s
invests in fintech companies potentially very powerful,” he says.
practising disruptive innovation. Fintech can offer many benefits to business customers too.
Another bank, ING, has created Perhaps the shape of things to come is the sort of service that
over 100 partnerships with fintech German fintech company Penta is offering SMEs. It launched
companies that power services its banking services in Germany in December 2017 and plans
including paperless online loan to expand to other countries including the UK, the
applications in Spain (enabled Netherlands, Spain and Belgium.
by the fintech Kabbage) and Co-founders Lav Odorovic and Luka Ivicevic had both been
investment services in Germany involved in start-ups, where they formed a very negative view
(with fintech company Scalable).
New entrants that could attract
large numbers of customers include
mortgages and savings provider
Atom Bank, online banking service
providers Monzo and Starling Bank,
and usage-based insurance provider
Trov, which offers automatic cover
on phones and other electronic
devices taken out of the home
without forcing customers to buy
annual cover. Other interesting new
entrants include “robo-advisers” –
online investment service providers
like Robinhood in the US, or
Nutmeg and Wealthify in the UK
– which allow people to invest sums
as small as they like for low fees.
“New providers have improved
the customer experience and
provided more choice,” Raisbeck
says. But the proliferation of such
services presents a new challenge,
he continues, adding: “You end up
with multiple service providers and
lots of apps on your phone, which
is quite a hassle. So who will be
your financial services wallet?
Who can be the aggregator?”
CHUTTERSNAP/UNSPLASH

Starling is trying to do this,

allowing customers to access
payment, investment, savings,
mortgages, insurance and peer-to-
peer financial services provided
by other companies through its

ECONOMIA MARCH 2018 35

FINTECH

which all banks currently spend

huge amounts of money each year.
In 2016 Santander ran a staff pilot
for blockchain-based international
payments, using Apple Pay and
blockchain technology supplied
by Ripple, one of the fintech
companies which Santander
InnoVentures invested in.
“The feedback was great,” says
Ed Metzger, head of innovation and
technology at Santander UK. “We
created a number of key benefits
that would be much harder to
create using legacy technologies,
around certainty of when the
payment would arrive, how much
the end-to-end transaction would
cost; and exactly how much would
arrive in the destination account.
We’re now actively looking at
opportunities to use this technology
for customers in the UK and
elsewhere.” Santander is also
investigating the use of blockchain
for trade finance.

B
lockchain supports what
may be the best-known
fintech invention, the
cryptocurrency bitcoin, which
relies on transactions being
recorded in a blockchain
Transactions in a tap are of business banking services in general and particularly those distributed ledger. Such has been
available from online available for start-up companies. For example, it often takes the volatility of the price of bitcoin
banking providers, such
as Starling Bank, above several weeks to set up cross-border payment facilities or to in recent months that it is perfectly
provide the company’s legal representatives with debit cards. possible the investment bubble
Penta’s proposition is designed to help small companies open around it will have burst, or at least
business accounts much more quickly and easily. It is based in deflated dramatically, by the time
part on research conducted with 100 SMEs in Germany and the you read this article (its value was
UK to find out what they wanted from a business bank account. swinging wildly earlier this year,
Penta’s services are delivered in partnership with another for example). But even if that does
fintech company, solarisBank. Odorovic says Penta approached happen, cryptocurrencies based on
12 other, well- blockchain technology will surely
established banks, continue to flourish in one form or
“[People] have high expectations but none could work another because blockchain gives
with the APIs Penta these currencies some degree of
of an online customer journey. The wanted to use. Also, security. It is the key reason why
financial sector has the biggest gap communication with a growing number of multinational
decision-makers in companies are assessing future use
between the experience customers the other banks of cryptocurrencies for low cost
want and the experience they get” was slow and international transactions within
hampered by internal their businesses.
bureaucracy while Other fintech innovations that
solarisBank offered a much better cultural fit. could have a particularly significant
Another aspect of fintech that is increasingly likely to have influence on the future of financial
a significant impact on financial services – and the accountancy services are related to machine
sector – is blockchain, which is built on a distributed ledger learning (a form of artificial
system. This offers a way to transfer the ownership of assets intelligence) and data analysis.
and record data permanently in a form that is always visible Spotting business opportunities
to all participants, making it secure and efficient. Its use for revealed by financial and/or
payments, reconciliation and settlement processes could cut customer data and creating more
costs dramatically. Many financial institutions have joined attractive products offered in a
a consortium, R3, which is building a blockchain-based more personalised way is at the
distributed ledger for interbank reconciliation, a process upon heart of many new developments

36 MARCH 2018 ECONOMIA

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FINTECH

“There’s an increasing trend for

systems producing digital invoices.
If they’re in a format that can be
read by another computer, they
can be automatically processed”

WHAT FINTECH MEANS

FOR ACCOUNTANCY
One growing area of fintech is
online accountancy software and
services such as Intuit’s QuickBooks,
AccountEdge, and those provided
by Xero and Sage. Collectively, along
with improved technology used by
accountants, these technologies
are fulfilling predictions about
the automation of accountancy.
The development of services
that combine some elements of
accounting with banking services,
such as Counting Up, may also
contribute to this process.
There has also been an increase
in the use of digital invoicing. “There’s
going to be an increasing trend for
systems producing digital invoices,”
says ICAEW technical innovation
manager Mark Taylor. “If they’re in
a format that can be read by another
computer, then they can
be automatically processed.”
German fintech company in the financial sector. Blockchain distributed ledger
Penta launched its banking Of course, the need to protect technology will also have an influence
services in Germany last
year and plans to expand data and secure transactions makes on the future of accountancy,
to other European it even more vital that security and suggests KPMG’s Murray Raisbeck.
countries including the
fraud risks are managed effectively. “As blockchain becomes a
UK and the Netherlands
Fintech based on machine learning mainstream technology, distributed
will help here too, through the use ledgers are going to start replacing
of technologies such as Barac, traditional ledgers, because
which employs artificial intelligence to detect cyber attacks transactional data on the distributed
that have been launched using encrypted data without actually ledger is much more secure and
decrypting the data. harder to tamper with,” he explains.
Unfortunately, as Jean-Noel Georges, global programme “That means there will be less need
director for the digital transformation practice at Frost & for accountants and auditors to
Sullivan, points out, fraudsters have fintech of their own that verify transactional data.”
is used to develop more sophisticated malware. Georges Growing use of automation and
believes biometrics technology, such as those based on artificial intelligence technologies
fingerprint identification or voice recognition, will play an will also have an effect. “Accountancy
increasingly important security role in combination with risk firms will be able to leave the
management software that assesses factors including the technology to carry out those tasks
way individuals use their devices and the language they while they use their skillsets to tackle
employ to help authenticate identity. This is another area other problems that clients have,”
where fintech companies are seeking to develop more says Raisbeck. “That should allow
effective technologies to improve the security of financial accountants to add more value.”
transactions and digital communications.
This mix of technology – mobile, distributed ledger, machine
learning and more sophisticated security – is the reason Further information
icaew.com/technical/information-
why the term fintech deserves to exist. It represents a new
technology/technology/blockchain
generation of technologies that offer the possibility of better
financial services for consumers, businesses and other icaew.com/en/technical/information-
technology/technology/blockchain/
organisations, as innovators force all service providers to raise blockchain-and-the-accounting-
their offerings. Fintech could be good news for everyone. ○ perspective

38 MARCH 2018 ECONOMIA

Cyprus is a modern, cosmopolitan and transparent business centre
offering opportunities for investment across a wide range of sectors.
Cyprus is committed to offering a high quality, duly regulated service
and unique set of competitive advantages that ensure the best
possible experience for investors and business people worldwide:
Positive economic outlook
• Cypriot economy expanded faster than EU average in 2016
• 3.8% growth in 2017
• 11 consecutive quarters in positive territory
• Consecutive upgrades by Credit Rating Agencies
• Positive EU Commission macroeconomic forecasts – robust growth
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Access to talent
• The youngest population & workforce in the EU
• 55% of the workforce has a tertiary degree
• Businesses in Cyprus operate in English and 73% of Cypriots
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• Booming private education sector with English taught
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• Visa-free access to European talent
• Easy access to global talent
Attractive tax system
• Corporate Tax
12.5% corporate tax rate
EU & OECD Compliant / Access to EU directives
Dividend participation exemption
No tax on profits from disposal of securities
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No tax on capital gains under conditions
Notional Interest Deduction (NID) on investment in Cypriot
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Attractive IP Regime
• Income tax for new residents
Income more than €100K/year
- Exemption from personal income tax of 50% for new residents
- Applies for the first 10 years of employment in Cyprus
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- Exemption from personal income tax of 20%, up to a
maximum of €8.550 per annum for 10 years
• Investor’s tax benefits:
Non-domiciled individuals who are tax residents of Cyprus are
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Access to markets
• Full access to European markets and 40+ EU trade agreements
• A member of the Eurozone since 2008
• Part of the European Single Market
• 60+ double tax treaties
Strong business support services
• Wide range of services make starting & running a business easy
• 700+ registered accounting firms including all major global firms
• 2,700+ registered lawyers and 160 law firms
• A range of serviced offices & co-working spaces
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Low cost of doing business
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Quality of life
• One of the best climates worldwide
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Excellent regulatory structure
• The legal system is closely aligned to the English common law
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• Frequently updated to meet investors’ changing needs
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• Establishing a business is simple and fast
About Invest Cyprus
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 CAUGHT

IN THE

There is an international trend for

PHOTOGRAPHY BY JOE BLOGGS

controls on inward investment as

technology is positioned as a threat
to national security. Could tech
sectors suffer if M&A rules tighten?
Rachel Willcox reports
40 MARCH 2018 ECONOMIA
 INWARD INVESTMENT

IF
you were ever in any doubt about
the UK government’s concerns about
potential meddling by the Russians in
Western democracies, “that speech”
at the Lord Mayor’s banquet pulled
no punches, overtly condemning
President Putin’s alleged campaign
of cyber espionage, fake news and
electoral interference.
“I have a very simple message for
Russia,” Theresa May told the banquet
audience in November. “We know
what you are doing and you will not
succeed.” The extraordinary speech by
the prime minister marked something
of a seminal moment in diplomatic
relations with the Kremlin, although
a public dressing down is unlikely to
have much of a dissuasive impact on
any dubious goings on.
As the political battleground shifts
from firepower to the “weaponisation
of information”, it is clear the govern-
ment has set its sights on the use of
technology as one of the biggest threats
to national security in recent times.
It is no coincidence, the govern-
CROSSFIRE ment has outlined plans to beef
up its powers for scrutinising
the national security implications
of particular types of investments,
under the auspices of its National
PHOTOGRAPHY BY JOE BLOGGS

Security and Infrastructure Invest-

ment Review. The Green Paper,
published in October 2017, is the result
of the government’s review of the
Enterprise Act 2002 and brings under
the spotlight the scope of transactions
subject to public interest review.

ECONOMIA MARCH 2018 41

THE RISKS
The vast majority of investment into
the UK’s economy raises no national
security concerns, the paper states.
“However, we need to be alert to the
risk that having ownership or control
of critical businesses or infrastructure
could provide opportunities to under-
take espionage, sabotage or exert
inappropriate leverage.”
The government’s proposals are
divided into short- and long-term
plans. In the short term, it proposes
amending the existing jurisdictional
thresholds for mergers in the military
and dual-use sectors – items used
for civilian purposes that may have
military applications – and parts of
the advanced technology sector. For
these areas, together with media and
financial sector deals, the government
proposes to lower the UK turnover
threshold from £70m to £1m and
to remove the requirement for an
increase in the share of supply, mean-
ing that the target alone could trigger
the 25% share of supply threshold.
New legislation could be in force in
early 2018.
In the longer term, the govern-
ment intends to undertake “a
comprehensive reform” focusing
on whether foreign investment in
businesses essential to the UK raises
any national security concerns.
Two potential reforms have been
identified: an expanded version of
the “call-in” power, which will allow
the government to use the current
voluntary notification regime to
scrutinise a broader range of trans-
actions of national security concern
than it can review at present; and a
mandatory notification regime for
foreign investment into identified key
parts of the economy, or into specific
businesses or assets. The consultation
on these longer-term reforms ended
on 9 January.
“There is a risk that
if the balance isn’t
right it could create
volatility and
uncertainty for UK
plc and for investors”
42
THE CHALLENGE
Bearing in mind the considerable
benefits brought by foreign direct
investment (FDI) to the UK economy
– the injection of foreign capital, new
jobs, ideas, talent and leadership – the
challenge facing the government is
to strike the right balance between
protecting UK jobs, know-how, and
technology without putting the brakes
on inward investment and an already
shaky M&A market, reeling at the
uncertainty brought on by the UK’s
decision to leave the European Union
and the General Election in June 2017.
The government says it expects the
need to act would be relatively rare
and it is also at pains to stress that
scrutiny does not mean making any
part of the UK’s economy off-limits
to foreign investment. But despite
promising that reforms will only be
necessary and proportionate steps
to protect national security, there
is genuine concern that swathes
of technology companies could be
inadvertently caught in the crossfire
of new rules.
Despite pledges from the prime
minister that the UK will remain “open
for business: open to investment
in our companies, infrastructure,
universities and entrepreneurs”, any
protectionist measures are at best
unhelpful and at worst detrimental
to an already unsettled market, warns
David Petrie, head of ICAEW’s Corpo-
rate Finance Faculty.
“We have one of the most favour-
able regimes to encourage foreign
investment. The problem here is one
of dual use [technology that can be
used for civilian and military applica-
tions]. Unless the regulations include
clearly-set out tests, a large number of
tech-related deals or new investment
arrangements could be delayed as a
result of referral to the Competition and
Markets Authority (CMA),” says Petrie.
“Private equity firms may be reluctant
to invest if the acquisition options are
severely limited by legislation.”
THE WARNINGS
A formal response submitted by the
Institute warns that the success of any
reform will hinge on a combination of
targeting clearly-defined sectors and
transactions; and a highly-effective
screening process. “The targeting
point will prevent uncertainty and
ambiguity over interpretation, either
of which will hold up investment. The
point about process recognises that
efficient implementation of the regime
will be key – adequate resources and
sector experience will be necessary to
deliver the service so that the opera-
tions of the businesses involved are
not unduly disrupted,” it says.
ICAEW also urges the government
to pursue joined-up policies so that
reforms in this area do not undermine
the impact of measures announced
following the Patient Capital Review
consultation, which focused on
measures to increase the supply of
capital to growing innovative firms.
The importance of the tech sector
to the UK economy was drummed
home by the latest Tech Nation report,
which found that the UK leads in
Europe, attracting £28bn in technol-
ogy investment since 2011, compared
with £11bn in France and £9.3bn in
Germany. The digital economy,
which is growing at twice the rate of
the wider economy, now contributes
around £97bn per year, up 30% in five
years, according to the report.
“The tech sector is a source of
real competitive advantage to the
UK economy and if the ability to
get a return or change ownership is
limited, that could be really damag-
ing. Our function is to make sure that
investment and M&A activity can take
place without being slowed down by
the unintended consequences of
well-intentioned government policy,”
adds Petrie.
“The UK is a very attractive market
for overseas acquirers and in 2017 over
40% of all UK technology acquisitions
had an overseas acquirer,” says Brian
MARCH 2018 ECONOMIA
 INWARD INVESTMENT

THE WORLD VIEW

“The tech sector is a source of real
competitive advantage to the UK
economy. Our function is to make
sure investment and M&A activity
can take place without being
slowed down by the unintended
consequences of well-intentioned
government policy”
Parker, co-founder and head of M&A companies and investors enough clar-
at Icon Corporate Finance. Parker ity on whether a particular transaction
isn’t unduly concerned that reform would fall within the scope of this
of the rules will have a negative impact regime,” Gill says.
on the market and believes the UK Against a backdrop of growing
will continue to be an attractive loca- protectionism globally, uncertainty is
tion for overseas investors. a deal killer warns Salmaan Khawaja, a
But not everyone shares his director in the corporate finance advi-
optimism. Jon Gill, a partner at law sory team at Grant Thornton. “The
firm TLT, believes the proposals are UK has long seen foreign investment
counterproductive to the UK’s goal in infrastructure projects and there
of becoming a world leader in the has been a mechanism for dealing
“industries of tomorrow” and could with it. But there is a risk that if the
have a chilling effect on investment. balance isn’t right it could create
GETTY IMAGES, ALAMY
What’s true is that foreign invest-
ment controls around the world vary
widely. Following a review by the
UK government of the approaches
taken by the US, Canada, Australia
and France, it considers that the
UK’s current approach to scrutinis-
ing national security implications of
foreign investment, particularly those
into national infrastructure sectors,
appears less well developed and more
limited than in other countries.
Andre Pienaar, managing partner
at specialist technology investor
C5 Capital, believes the proposed
changes would bring the UK in line
with other G7 nations: “Developing
a national security framework for
technology investment has become
the norm. It gives more certainty
and clarity in terms of processes and
approvals rather than the case by case
approach we had in the past, and as
an investor, we welcome it.”
Pienaar speculates that the risk
of losing privileged access to the US
market was more of a driver than a
desire to follow best practice. “They
may have developed a view that the
UK could not be such a trusted invest-
ment partner because we did not have
our own house in order.”
While the National Security and
Infrastructure Investment Review
isn’t perhaps enough in itself to
cause concern, taken in the context
of other attempts to tighten up foreign
ownership, it may do little to boost
confidence among foreign investors.
The independent Takeover Panel’s
proposals for reform of the Takeover
Code came into effect on 8 January
2018, although its motivation is driven
less by national security and more to
ensure public funds are protected in
merger situations.
Adam Hadley warns that greater
recognition of the existential threat
that technology represents is needed.
He runs Tech against Terrorism, a UN
project to help combat exploitation
of technology by terrorists. “National
security and technology are inter-
twined like never before and the
government is right to be concerned.
The challenge is, will they come up
with the right solutions and is enough
investment being made in this area?”
Pienaar too believes it is time for

“The proposed definitions of these
areas of advanced technology, being
multi-purpose computing hardware
and quantum-based technology, are
not sufficiently well-defined to give
volatility and uncertainty for UK plc
and for investors. If the UK is seen as
a difficult investment environment,
they will look elsewhere and the world
is a big place.”
change. “We recognise the scale and
pace of innovation happening now so
making sure our own companies are
protected is an important recognition
of the threat environment.” ○

ECONOMIA MARCH 2018 43

ROUNDTABLE
PARTICIPANTS
Rob McCargow, AI
programmer leader, PwC
Terry Walby, CEO,
thoughtonomy
Chris Sykes, CEO, Volume
Kirstin Gillon, technical
manager, IT Faculty, ICAEW
Michael O’Brien, partner,
head of technology,
Kreston Reeves
Michael Vroobel, VP
Operations, Market Invoice
Amy Reeve, editor,
economia (chair)

DON’T MISS
THE TECH
EXPRESS

How should business deal

with the relentless advance of
technology? Amy Reeve finds
out from six industry experts
PHOTOGRAPHY BY MATTHEW ANDREWS

44 MARCH 2018 ECONOMIA


T
echnology is changing everything,
and the pace of change is rapid. It’s so
transformative that sectors are blurring,
and its power is harnessed to drive anything from
productivity and efficiency to wellbeing and
sustainability. From fashion to banking,
manufacturing to publishing, accountancy to
agriculture, its impact is everywhere and offers
much pause for thought. What are the costs of
implementing new technology; are they worth it;
and who’s responsible for ROI? Do I have people
with the right skills to understand this
technology, let alone implement it? What are the
myths, what’s the reality, who do I believe? Will
new technology such as artificial intelligence
take away too many jobs or make roles more
meaningful? And what are the risks? How can
I protect my organisation? What do I prioritise?
We put these questions to a group of people
with technology embedded in their organisations.
Here’s a summary of what they had to say.
INVESTMENT AND RESPONSIBILITY
Education is key, explains Chris Sykes: “Every
customer has a different understanding of
what artificial intelligence (AI) is, so we get key
stakeholders in a room and re-educate them – tell
them what we know about AI they won’t find on
Wikipedia. We’ll also help them assess how ready
they are.” That’s the challenge, agrees Terry
Walby – technology is advancing at pace but is
relatively unproven at scale in more significant,
“We have relationships with
schools in disadvantaged
areas that wouldn’t have
been on our radar three or
four years ago. Students
may not have an A* in maths
but are incredibly in tune
with AI”
PHOTOGRAPHY BY JOE BLOGGS
Clockwise, from far left: Terry
Walby, from thoughtonomy,
Rob McCargow, from PwC,
Kirstin Gillon, from ICAEW,
and Michael Vroobel, from
Market Invoice
ECONOMIA MARCH 2018
ROUNDTABLE
consequential areas. “I don’t think it’s wise to
have a really directional AI and IT strategy, you
have to have an innovation mindset,” he advises.
“Be experimental, create a culture in your team
that gives them permission to fail.” When he’s
convincing businesses to invest, his counsel is
to treat it as a journey: “It’s not a big bang
decision, you can do it iteratively. We’re trying
to democratise the use of AI technology; to put
it in the hands of people who can deliver a real
difference.” This point resonates with Michael
Vroobel, who works for a company where
technology is in its DNA. As he explains, a good
in-house tech team is expensive to run, so you
need to make sure they’re utilised properly.
“Think about the business case, plan quarters
ahead, build a roadmap. Transactions over the
past few years have increased by thousands of
per cent, and our operations team has increased
by one or two heads, so technology has a massive
impact,” he explains.
TALENT/SKILLS
There’s an enormous demand for data science
skills and machine learning engineers, confirms
Rob McCargow; it’s a competitive landscape. His
firm is improving its longer-term talent pipeline
by creating technology degree apprenticeship
programmes. “But the interesting thing here
is we’ve got a huge untapped population that’s
not evidently showing up in the workforce,
particularly around gender. We’ve got to have
a socially representative AI workforce,” he says.
Technology is definitely changing recruitment
says Michael O’Brien. His practice is hiring
people from more diverse backgrounds than it
traditionally would have. “We have relationships
with schools in disadvantaged areas that wouldn’t
have been on our radar three or four years ago.
We take on people with a different understanding
of what technology is and how it’s used. They
may not have an A* in maths but are incredibly
in tune with AI.” Walby had to take the initiative
45

“If you automate everything
and go all AI or tech, do you
alienate your customers by
not having people on your
customer service?”
when it was either too expensive or impossible
to find the skills needed to grow his “fairly
early-stage business”. If you can’t hire, he says,
you train: “We developed a programme to bring
first-jobbers into the business and make them
a core part of what we do; to learn as we were
building.” A great team has a mix of skills, says
Vroobel, but that can sometimes be stymied by
geography. “We’re business finance so we’ve got
tech but we also need core finance skills. The
[tech] engineers want to be in Shoreditch, it’s all
set up for that demographic. We had a beautiful
office in Richmond and it was hard to attract
talent there.” Your employees must be open to
learning new skills, adds Sykes. In his business,
they have to react just in time. “We’re working
with natural language data models so our
copywriters are being reskilled to become
dialogue authors. What’s the tone of voice, how
do they respond to off-topic questions, inject a bit
of humour? We train people to interpret those
data models.” And Kirstin Gillon says: “Our
members aren’t going to be data scientists but
they still need to have a higher level of skill in
technology and AI and be an intelligent user;
to have meaningful conversations with the data
scientists and a common language.”
MYTHS AND FEAR
Citing PwC research, McCargow says 30% of
existing jobs could be highly susceptible to
46
automation by the early 2030s. On the other side,
technology will lead to substantial productivity
gains, possibly adding 10% GDP to the UK
economy (about £230bn). So what was the feeling
around the table about job displacement and an
innovative workforce? “If you don’t evolve and
adapt, you will die,” says Sykes. Most professions
do that anyway, suggests O’Brien. “If you look at
accountancy, it was quill and ledgers to Excel
spreadsheets to Xero and cloud computing, there
is a continuous evolution. This is just the next
step. It does depend on the job,” he clarifies. It’s
not about jobs but about tasks within jobs, points
out McCargow. “The heart of professional
accountancy is about trust and assurance, the
concept of that will never go away, the way it’s
delivered will change immeasurably. You will
need people that aren’t just classical auditors but
people that can audit AI.” The core value of what
the profession does in terms of providing trust,
supporting business, will always be there agrees
Gillon. How that translates into tasks will look
radically different. “There are great opportunities
to help businesses add value, to make better
decisions, but you have to recognise that for an
awful lot of individual accountants there’s a big
process of change,” she says. People must get this
idea out of their heads that AI is a scary robot
that will take over the world, insists Walby. “My
fundamental belief is that most businesses are
constrained by their access to skilled resources,
so if you can liberate time from the people who
work for you then you’ll be more productive.”
It tends to be extreme views, observes O’Brien –
Doomsday or the next industrial revolution.
“I don’t think we can be naval-gazing, worrying
about a Doomsday scenario when the technology
can be harnessed to extraordinary business
benefits as well,” says McCargow.
ATTITUDE/CULTURE
There are definite differences in the way people
adopt technology, and the speed at which they
adopt, says Walby. “Generally, the UK population
is not the most ready to adopt things compared
to other geographies like the Nordics.” O’Brien
agrees – the Nordics, Asia, New Zealand, these
don’t tend to lag behind. And yet perversely, a lot
of new technology is developed in the UK, adds
Walby. Let’s not write off brand Britain too soon,
says Sykes. “Half of our revenue, around £5m
of business comes from Silicon Valley. Britain
is trusted and seen as delivering”. Attitudes are
changing, continues Vroobel. “Once you get past
MARCH 2018 ECONOMIA

the initial stumbling block, traditional family
businesses love it,” he says. It comes back to
customer education, he adds. Anxiety and worry
is not confined to the UK, says Gillon. “I spent a
lot of time in China where their [tech] adoption
is enormous. But every presentation I did for
students I was asked: ‘Am I going to have a job in
five years?’ I think that core worry is everywhere,
I don’t think it’s unique to the UK. They may be
less risk averse than the UK in terms of rapid
adoption, but there are still underlying concerns
about the long-term impact of AI in China.”
GOVERNANCE
At the World Economic Forum this year there
was a huge focus on the UK setting out its stall
as a world leader in ethical AI, says McCargow.
“There’s some sense behind this. We can’t
compete with China, which has 800 million
people online, a lot of data to train algorithms
on.” But the UK is strong on “trust, maturity
of regulations, and good business”. It should
focus on this. From an accounting perspective,
he adds, even people building the most
sophisticated AI sometimes can’t explain how
an optimal outcome has been reached. That’s
an opportunity for accountants: “The tough,
technical challenge of provability and
transparency.” The key challenge for government
and regulators is that they’ve got to move quickly,
believes Vroobel. “Otherwise big tech companies
will and it will be too late to do much about it.”
ECONOMIA MARCH 2018
ROUNDTABLE
YOUR CHANCE
TO WATCH THE
DISCUSSION
A video recording
of the roundtable
discussion is available
online. It reveals
what technolgy each
participant believes
will have the greatest
influence on business.
See the economia
website for details
Another challenge is definition: what constitutes Clockwise, from below left:
AI, asks Walby. “Where does it start and stop? Chris Sykes, from Volume,
Michael O’Brien (centre),
There is no universally agreed definition. Is any from Kreston Reeves with
algorithm in any computer a piece of AI that Kirstin Gillon and Michael
Vroobel, and economia
needs auditing?” There’s also privacy, says Sykes. editor Amy Reeve (above)
“How much do you want people to know about
your information, how much are you willing to
give away?” It’s a hot topic in his industry, says
Vroobel: “We’re going to learn that really soon
with Open Banking.” On the subject of definition,
Gillon says we shouldn’t compartmentalise: “It
worries me that we put AI in a box; it’s actually
just how you run your business, what your
business model is, how you integrate and embed
AI into your decision-making. It’s not a space in
the corner where the AI specialists sit and think
deeply. Everything is about data.” And AI lives
off data, without it it’s nothing, says Walby. “It
can’t be a bolt on,” agrees O’Brien.
RISK
Cybercrime is the obvious threat, and therefore
you must invest in the best infrastructure, says
Vroobel (especially with GDPR coming up). What
also plays on his mind is customers. “If you
automate everything and go all AI or all tech, do
you alienate your customers by not having people
on your customer service? We’re people plus
technology; it’s hard to know how people are
going to behave and react when you introduce all
of this new technology.” Gillon thinks it’s about
attitude and being ready to respond. “However
47
ROUNDTABLE
Above: Rob McCargow good you are, if there are bad people who want to
listens to Terry Walby as get into your systems they probably can, so there
the roundtable discussion
is filmed, below is a need to be ready, to have the communications
ready, make sure you know what you’ll need to
do.” McCargow has already turned his thoughts to
how AI can be used in a harmful way. “When you
start augmenting traditional cyber attacks with
AI-powered attack vectors, that could be
substantially more damaging. On the other side
we’ve got great companies which are augmenting
this into cyber defence. The future of cyber
security could look quite different in a few years.”
HOW AI IS BEING USED TODAY
A key priority for most large businesses is to strip
out cost, says Sykes. He’s seeing early adoption of
what he calls automating the first touch, to “push
the humans to high-value interactions”. He gives
the example of a 24/7 concierge, a conversational
platform at a law firm that deals with an enquiry
at any time and responds. He says businesses are
investing in technology, such as virtual reality, for
training – “putting people into scenarios that are
otherwise dangerous or expensive to do”. Walby’s
technology can learn over time, for example,
what an invoice looks like, what the important
information on it is, and how to extract that to
execute the process. “It doesn’t need to be taught,
it’s using AI and pattern recognition over time to
understand what it’s looking for.” At the other end
of the scale he has technology that is becoming
self-aware: “It’s understanding how long it takes
48
“Our biggest enemy is lack
of awareness: people are
largely uninformed about
what technology could
do for them”
to execute a process and if it finds it’s easier to do
something at 3am because it takes less time, it will
refine the process to deliver a better outcome.”
McCargow has seen a combination of technologies
applied together to great effect: a drone, image
recognition, a deep learning neural network, a
geospatial app and virtual reality. “It’s not just
looking at AI in isolation but how it’s harnessed
with other emerging technologies,” he says. In
Vroobel’s business, technology is used to deliver
better customer service. “It helps with tasks
where people tend to make errors, so if you’re
doing a repetitive task over and over again, you’re
likely to send money to the wrong place. That
doesn’t really happen anymore.”
CONCLUSION
The overall sentiment in the room is largely
optimistic. McCargow describes himself as “a
responsible optimist. This can be great if we get
full participation from the institutes, the start-
ups, big business and the public.” It comes back
to communication, he says: “How we break some
of these myths and demonstrate how it is going to
enhance lives. This comes through data privacy,
trust, ethics, jobs, purposeful companies
behaving well. If we get all that right then we
can look forward to tremendous gains from the
technology.” Walby agrees: “Our biggest enemy is
lack of awareness: people are largely uninformed
about what technology could do for them, what it
is, what it means, how they could leverage value
from it.” Let’s stop using images of humanoid
robots whenever we refer to AI for a start, pleads
Sykes. “We work with humanoid robots and
they’re not artificially intelligent in any way,
they’re just beautifully engineered devices
that we can train with a very narrow dialogue.
Humans are controlling these things, they’re not
wandering around autonomously.” The biggest
challenge in Gillon’s opinion is pace of change.
Her plea is that readers (and regulators) keep up
to speed so they’re not left behind. The beauty of
all this technology, adds O’Brien, is that in three
or four years’ time everyone will be using it
without realising it. “We won’t call it AI anymore.
It’s part of life now, and it will become the norm.
It’s about how we get there, because it’s taking
the profession and the rest of the world with it.”
Vroobel agrees, it’s about implementation. “AI
is a bit of a buzzword in a lot of boardrooms.
Actually, where do you get the most benefit?
You’ve got to build the best you can where
you’re going to get the ROI.” ○
MARCH 2018 ECONOMIA

Robots to the rescue
How AI diversifies an accountancy practice
IS THE COMBINED onslaught of
reducing audit requirements, the rise
of low-cost, online, DIY systems and
the inclination of most start-ups to be
self-sufficient and tech savvy,
unstoppable? The bigger firms have
developed bargain deals for very
small companies in the hope of
spotting and getting alongside the
winners of the future.
An accountant may no longer be
the first choice for a new business
owner looking for guidance. They
might open a bank account offering
entrepreneur services instead, joining
a start-up hub that provides links to
sources of free or low cost advice. But
these can consist of generalised
blandishments delivered at
“hallelujah” sessions and the offer of a
mentor or coach to provide guidance
about a business they barely
understand. Still, the thinking goes, it’s
better than going it alone, costs little
or nothing and they get to meet other
entrepreneurs for mutual support.
WHAT THEY COULD GET
FROM AN ACCOUNTANT FAR
SURPASSES ALL THAT
So why don’t they know about it, or
look for it? After all, a community
accounting practice is wired into
what’s happening locally, can visit
client premises, see the business, get
to know its team and make informed
relationships and productive
introductions. It should be the first
port of call for any business seeking
advice. But under 30% of small
businesses do so.
Why has it gone so wrong for
accountants who used to dominate
the professional business services
market? Runagood® thinks the three
big barriers are:
1 Accountants are naturally cautious
about offering anything they may
feel unable to deliver on, such as
providing advice and solutions for:
• Urgent issues including marketing;
people; systems and technology;
customer service; logistics;
production; business valuation;
crisis management.
• Longer-term issues such as
exit; recovery; growth; lifestyle;
effectiveness; diversification; risk
management.
2 A preference for recommendations
and introductions to new clients,
rather than proactive marketing.
3 Business owners increasingly
thinking that accountants can
SPONSORED FEATURE
only provide them with expensive
compliance and tax services.
SO, CAN ALL THAT BE
REVERSED?
Yes, says Runagood®, inventor of
the first AI business adviser. Founder
Duncan Collins says: “You only
need to look at recent government
research* to see how small
businesses seek advice and what
about, with accountants showing up
as being the most trusted type of
business adviser. Yet, they take only
28% of the £2,500 that is the median
average that smallest business
spends annually on business advice.”
He asserts that the door is wide
open to grasp a new market that
is worth at least £7bn annually, ie
£1m per UK accountancy practice.
But what of those three big barriers
holding them back?
Consider this: if there were such a
thing as an AI business consultant
that any accountancy practice could
add to its team, it would eliminate
employment costs, never complain,
not take holidays, work 24/7 every
day of the year, never be sick or late,
and come with all the knowledge and
skills needed to offer the entire range
of business advice. Such a miracle
would clear the first big barrier
immediately and quickly overwhelm
the other two with irrefutable
evidence that “this practice is in
business for every business”.
Runagood® claims that it has done
exactly that, having spent over £1m
developing a unique online platform.
It enables any practice to become a
fully-rounded business mentor,
coach, trainer, consultant or project
manager, within seven days of
making the commitment.
So confident is Runagood® of its
remarkable boast that it is offering
disbelievers a live product demo and
Runagood® Business Centre
Partnership free trial at
runagood.com/partners
* www.gov.uk/government/uploads/
system/uploads/attachment_data/
file/624580/smallbusiness-
survey-2016- sme-employers.pdf

Everything,
everywhere
Against a difficult financial backdrop,
one Zimbabwean business is proving
that doing good really can lead to
doing well. Sandra Haurant profiles
Econet Wireless, on a mission to
connect the country
50
W
hen a company manages
to flourish within a
challenging political and
economic context, it’s clearly doing
something right. Zimbabwe’s financial
conditions have included slow growth,
rising unemployment and debt distress.
The El Niño-induced drought hit its
economy as did lower commodity
prices, the appreciation of the US
dollar and insufficient external inflows.
However, the International Monetary
Fund revised higher Zimbabwe’s
economic growth forecast (from 2%
to 2.8%) in 2017 and the conditions of
doing business are expected to improve.
Meanwhile, Econet Wireless,
Zimbabwe’s leading telecommunica-
tions provider, has been going from
strength to strength since it launched
its network in the country in July 1998
MARCH 2018 ECONOMIA
 COMPANY PROFILE: ECONET WIRELESS

and listed on the Zimbabwe Stock

Exchange in September of the same
year. In 2009, Econet became the
first operator in Zimbabwe to launch
data services using 3G technology.
Today, it is one of the country’s largest
companies.
The Econet group encompasses a
host of businesses, including Liquid
Telecom, which was behind the 2009
launch of a high-speed, cross-border
fibre network connecting southern
Africa with the wider world, and
Kwesé TV, a pay as you watch satel-
lite television service that has now
reached across the continent and
is visible in countries including
South Africa, Dubai and Kenya.
Appropriately for an enterprise
with international ambitions, kwesé
means “everywhere” in the main
Zimbabwean language of Shona.
From its telecoms roots, Econet has
diversified into several fields aimed at
improving the lives of Zimbabweans
through digital technology, following
a business model structured around
a broader telecommunication, media
and technology (TMT) framework.
One recent major success has been
growing within the technology sector.
The EcoCash brand, which launched
in 2011 to provide a mobile financial
technology solution to Econet’s
customers, was highly commended
in the Finance for the Future Awards
2017. “EcoCash falls under a subsidiary
company of Econet Wireless, called
Cassava Fintech,” explains EcoCash
CEO Natalie Jabangwe-Morris. “It is
a pan-African firm whose premise
is to drive mobile payments, ecom-
merce, and mobile insurance across
the African continent.
“We provide a huge array of unique mobile wallet, which they can then “The manner in
services, allowing peer-to-peer cash out via any one of our agents.”
payments, the ability to use your The company also offers loans –
which we launched
mobile money from your ‘wallet’ using bill payments for its telecoms our services, under
on your mobile telephone to pay a service to provide proof of eligibil-
retailer or restaurant, for example. ity – and micro insurance products.
a good finance
The equivalent would be going into There is a savings wallet too, allowing strategy, allowed
Sainsbury’s and buying a loaf of bread individuals or groups to put money
with your phone. We also offer utility aside; and, the most recent addition
the business to
bill payment for water and electricity to EcoCash’s offering, a platform for achieve significant
and, because we have the telecoms trading securities and investments.
company, we sell over 70% of the air
milestones in the
time of Econet Wireless Zimbabwe NEEDS MUST shortest time”
PHOTOGRAPHY BY WALDO SWIEGERS

through the mobile money platform.”
EcoCash’s reach goes further still,
Jabangwe-Morris adds. “We provide a
connection with the diaspora, where
Zimbabweans abroad in South Africa
and the UK, for example, can send
money in real time to their friends
and family at home, directly into their
The idea for EcoCash was born out
of necessity. For years, Zimbabwe
endured economic turbulence and a
long period of hyperinflation. Having Natalie Jabangwe-Morris,
turned its back on the Zimbabwe chief executive of
dollar in 2009, it was trading mainly EcoCash, left, and Nepias
Matsuro, above, CFO
in US dollars. The country was facing of parent company
a severe cash crisis, and EcoCash was Econet Wireless

ECONOMIA MARCH 2018 51

created as a means to help people,
and the banking sector, through it.
“EcoCash was a strategic solution
to a challenge that Zimbabwe was
facing,” confirms Jabangwe-Morris.
“As a result of hyperinflation, citizens
had lost complete trust in the banks
and the nation was really starved
of deposits in the banking sector,
because the people were not bring-
ing their deposits. They couldn’t trust
that their money would be safe. As
a telecommunications company, we
were pivoted on solutions provision
and on addressing problems through
the use of technology.”

BANKING ON INNOVATION
There was another problem to be
solved, too. “At the start of launching
our service, only 10% of Zimbabweans
were actually banked,” says Jabangwe-
Morris. “Financial inclusion was very
small, so we though, why not innovate
around a new know your customer
model?” EcoCash was designed to
ease the cash crisis and aid financial
inclusion, using airtime-purchasing
history for mobile phone use as a
credit-referencing tool. A million
new customers joined the EcoCash
service in its first six months. “At the
time, we recorded the fastest rate of
consumer acquisition in the world,
which shows just how appropriate and
relevant the solution was in terms of
addressing the problem in Zimbabwe,”
says Jabangwe-Morris.
The people of Zimbabwe were, it
appears, supremely ready for the
service the enterprise was offering.
Instead of queuing at the cash-starved
banks in the hope of making with-
drawals from fast emptying vaults,
people were able to transfer money
from their account to their phone
wallet, which allowed them to spend,
to transfer money to friends and
family and to use their funds, even
if they could not physically hold the
money in their hands. The majority
of Zimbabwe’s banks now work with
EcoCash to allow their customers to
move money around.
It was not the first to provide
mobile money services in Zimbabwe,
but the company has certainly had
the greatest impact on the sector.
Nepias Matsuro, CFO of Econet, says:
“I think what stands out clearly is that
we managed to roll out our services
much faster than any other operation
in the world. The manner in which we
launched our services, under a good
finance strategy, allowed the business
to achieve significant milestones in
the shortest possible time. There
was no sacrifice in terms of profit,
and we worked within our values.
We put people first, so we sought to
positively transform peoples’ lives.”
If the figures were impressive in
the beginning, they have lost none
of their lustre now. “Within the first
six years of launch we are now driving
more than 54% of Zimbabwe’s GDP.
In terms of financial inclusion, within
that short space of time, with good
financial and business leadership, we
have seen more than 80% of the adult
population of Zimbabwe getting on to
the platform,” says Matsuro. “So the
result is that their financial inclusion
has improved exponentially. And if
you look at the number of transactions
on the Zimbabwe national payment
platform, 81% of transactions are
driven by mobile money solutions,
of which EcoCash occupies 99% of
the market share.”
TO THE RESCUE
It was this drive towards sustainability
that Matsuro believes the judges in the
Finance for the Future Awards saw as
worthy of recognition. He adds: “In
an environment that was heavily
affected by hyperinflation and liquid-
ity challenges, EcoCash rescued the
nation in terms of digital payments;
without EcoCash, it would have been
very difficult to drive the digital adop-
tion agenda.”
Econet has the lion’s share of
Zimbabwe’s mobile telephony market,
with around 10 million customers
currently signed up to the network.
Of those, some seven million are now
EcoCash customers – pretty good
going for a country with a popula-
tion of around 16 million. And, says
Matsuro: “We have headroom to bring
the three million remaining customers
into EcoCash so that we have 100%
of our customers using the mobile
money platform.”
The company has its sights set
on improving the flow of business
to business transactions, an area in
which it sees significant opportunities.
And as the country on the whole has
demonstrated an enthusiasm for digi-
tal payment services, the prospects
are looking good.
But Zimbabwe, of course, is going
through another period of change
and it may take a while for the
dust to settle and the way ahead to
become clear for businesses. “What

52 MARCH 2018 ECONOMIA

 COMPANY PROFILE: ECONET WIRELESS

“EcoCash was a ECONET STATS

strategic solution
to a challenge that
Zimbabwe was
facing. Citizens
had lost trust in
the banks and the
nation was starved
of deposits”

we do is look for opportunities; our
business model is designed to seize
any opportunity that arises, because
we are designed to solve problems,”
says Matsuro.
Meanwhile, it is Jabangwe-Morris’s
belief that the country is feeling
cautiously upbeat about its future
prospects: “There is a lot to watch.
It is too early to tell, and there is a
big job to be done, but there is a lot of
optimism and hope,” she says.
Whatever the future holds for this
southern African nation, Econet
sees its own potential reaching far
beyond the borders of Zimbabwe.
Having succeeded in keeping money
flowing within the country, and having
ensured inflows from the diaspora
across the globe, EcoCash is now
looking at a pan-African approach
to the mobile payment agenda. “We
are not limited to Zimbabwe,” says
Jabangwe-Morris. “We already touch
the lives of people in Australia, the
UK, America... We are not restricted
by boundaries, so we are already in
that space, but I think our task is to
consolidate our model in such a way
that we can roll out our services much
faster.” She adds: “We are also now in
Burundi, Lesotho and South Africa.
2011
saw Econet Wireless
launch the EcoCash
brand in Zimbabwe,
which it continues
to expand across
Africa, and is currently
Natalie Jabangwe-Morris available in Burundi,
and Nepias Matsuro
with stakeholder and
Lesotho and South
sustainability manager Africa
Florence Chimbetete, who
helped lead the company’s
entry in the Finance for
the Future Awards 80%
of the adult population
We are consolidating our offering of Zimbabwe are
across Africa as a continent and we signed up to the
see that accelerating.” EcoCash network
But, she says, at the heart of
Econet’s plans is a push for social
transformation. “At Econet Wireless, 81%
our mission and vision statement has of transactions on the
always been to pioneer and lead in Zimbabwe national
providing Zimbabwe with world-class payment platform
communication services. We were are driven by mobile
the first people to introduce the money solutions,
cell phone because of our mission of which EcoCash
statement. In trying to address the occupies 99% of
financial services gap in the country, market share
we wanted to do what we have done
with telecoms.
“We pivoted on that mission vision 10 million
statement and asked, how can we customers are currently
provide world class financial services signed up to the
for every Zimbabwean? So that social Econet network, of
transformation is the thing that drives which 7 million are also
us every single day, with all the prod- EcoCash customers
ucts we have launched. Providing that
social transformation and equality in
terms of what people should be able 54%
to do with financial services, just as of Zimbabwe’s GDP
we have with telecoms. We believe in is being driven by
doing well by doing good.” ○ EcoCash since its
launch in 2011
Entries for the 2018 Finance for the
Future Awards will be open from 12
March. Visit financeforthefuture.co.uk

ECONOMIA MARCH 2018 53

 A DAY IN THE LIFE

Wednesday

Thursday
Tuesday
Monday

Friday
A
DAY Stephen Marsh tells Julia Irvine
how an enforced change of diet
and the taste of raspberries with

IN juniper convinced him to start gin

company Pinkster
PHOTOGRAPHY BY JON SNEDDEN

THE
LIFE

ECONOMIA MARCH 2018 55

Stephen Marsh
progressed from making
the odd bottle of gin for
friends to selling it globally
HOW I CHANGED CAREER
After qualifying with Cooper Lancaster Brewers,
I stayed on as an auditor. Then in 1996 the
founder of Consolidated, a PR agency I’d audited
for several years, asked me to draw up a job spec
for a finance director. It was amazing how closely
the job spec matched my CV so I went to work for
him and stayed for 18 years. I got into gin entirely
by accident. I was quite ill in the noughties with
candida and had to cut sugar and yeast from my
diet, including alcohol. After two years, the
consultant said I could reintroduce alcohol but
only gin or vodka. I wanted something that had
flavour. I went through the fruit bowl before I
discovered that raspberries took the edge off the
juniper and made it really smooth. I spent the
next four years playing around with combinations
of botanicals to make a clean refreshing gin.
Friends started asking me to make them a
bottle. Then two friends whose opinions I
respected – Richard Bridgwood, founder of
Contender Entertainment, which created Peppa
Pig, and Sean McCreery, a leading fund manager
at Ruffer LLP – offered to put up some money.
Both now sit on Pinkster’s board, Richard
as chairman.
56
THE CHALLENGES I’VE OVERCOME
I am a firm believer in trying to cut the odds
in your favour wherever you can. Often the
difference between success and failure is narrow
and a very small adjustment can make all the
difference. I didn’t want to risk my close
friendships by taking their money upfront.
Nor, as a professional in my late 40s with an
awful lot of commitments, did I want to step off a
corporate ladder into the unknown without a) the
full support of my wife and b) a very shrewd idea
of our chances of success. I was not interested in
playing Don Quixote and tilting at windmills.
So I invested about £20,000 in some test runs
and signed up for four big foodie festivals. We
had some pink paisley stickers printed and each
time someone bought a glass we gave them a
sticker. What I was interested in was the number
of people buying a glass who already had a
sticker. People buying a first glass is curiosity and
I wasn’t going to make a career decision based on
that, just as I wasn’t going to make a decision
based on the platitudes of my friends. I wanted to
see whether people I didn’t know liked it enough
to buy it more than once. So we put a notch on a
pad each time somebody came with a sticker.
MARCH 2018 ECONOMIA
 A DAY IN THE LIFE

“People buying a first glass

is curiosity and I wasn’t
going to make a career
decision based on the
platitudes of my friends”

We smashed our target on each date at each

venue. At our third event, my wife came to see
for herself. She sat on a stand opposite and at the
end of the day she said she thought our figures
were understated by 20%. She’d seen people
tearing the stickers off and then going back to
buy more. She’d also heard people say they loved
it. She told me I had her permission to bet the
farm on it. So I went back to my friends and said
OK, if you are prepared to put up some money,
I am prepared to do it.

MY RESPONSIBILITIES
During the summer – which is our production
time – we’re working seven days a week.
Someone said to me the other day that I am much
more like a wine producer than a distiller and it’s
true. A distiller can flip the switch any time of the
year, set the stills going – you’ve got all your dried
botanicals, flavours, liquids. Whereas I think in
seasons. From the beginning of February I will
be speaking to our raspberry grower regularly
to find out how the crops are coming on. English
raspberries are available from April to late
November but they don’t have much flavour at
either end of the season. I prefer to wait until
June because I know they’ll have flavour, the
price has come down and we’ve got the labour.
I am no longer physically doing every single
bucket myself but I do taste every single batch.

MY TYPICAL DAY
There isn’t one. I often start the day feeding the
chickens, walking Betsy, our border terrier, and
talking to my team in Australia, before heading
for the office. I’ve got five sales staff who aren’t
based in the office and in the course of the
morning I will probably have conversations with
two or three of them. Invariably, we have people
coming in to talk to us. At any one time we’ve got
labels being designed, cartons being printed,
things going off for bottling. I spend a lot of time
on the phone talking to customers, suppliers and

ECONOMIA MARCH 2018 57

A DAY IN THE LIFE
“I knew nothing about the
drinks industry, which in
many ways turned out to be
an absolute blessing. I didn’t
know how it was done”
to staff. And thinking up new products. At any
one time I have a number of experiments on
the go even though commercially we got it right
first time.
INDUSTRY QUIRKS
I knew nothing about the drinks industry, which
in many ways turned out to be an absolute
blessing. Because I didn’t know how it was done
I didn’t do the same things as everybody else.
For example, the traditional route to launch
an alcoholic drink is via the on-premise trade. In
58
theory you pay a barman to recommend your Marsh now takes Pinkster
drink to the customers, the customers drink it to 200 events each year.
and like it and then reorder it. Once you’re doing
Through them he
estimates around 250,000
well enough, you then move to the off trade. I
didn’t get that particular memo. So we started
people have tasted
the products
by going to events – we now do 200 per year.
And we are selling around the world now.
We sell well in Australia, Hong Kong, Ireland,
Denmark, Singapore, Japan and we’re about to
launch in the US.
HOW THE ACA HELPED MY CAREER
Accountancy made me interested in business: not
long after I qualified, I set up Cheeky Monkeys,
a chain of toy shops, with my sister, and in 2007
I set up a website called myfamilysilver.com with
my brother-in-law. Everything I learned setting
them up has proved useful.
THE HABITS OF AN ACCOUNTANT
I have an extremely good finance director in
place so I know I can concentrate on my role
as MD. So I am shaking off the habits of an
accountant. I’ve gone native and I can honestly
say I’ve had more fun in the last five years than
I had in the previous 25. ○
MARCH 2018 ECONOMIA
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SAVINGS UP
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A royal calling
Sir Michael Peat was private secretary to HRH Prince
Charles, and later the Duchess of Cornwall. As he
receives ICAEW’s Outstanding Achievement Award,
he tells Xenia Taliotis about his career in the palace
60
W
hen I was 14, everyone
else went out and I was
left to have dinner with
my grandfather,” says Sir Michael
Peat, Commander of the Royal
Victorian Order (CVO), Knight
Commander (KCVO), Knight Grand
Cross (GCVO) and now recipient of
ICAEW’s Award for Outstanding
Achievement. “For want of
conversation, I asked him what an
accountant did. After a moment or
two, he said an accountant provides
integrity. I didn’t dare ask another
question and I am afraid that it took
me some years to work out what he
meant, but he was absolutely right.
Trust and confidence are the
foundations on which prosperity
is built and our profession is key to
promoting and safeguarding these
vital elements.”
Peat’s grandfather wasn’t talking
hypothetically but empirically. A
second-generation accountant, he
was the fourth son of Sir William
Barclay Peat, founder of Peat,
Marwick, Mitchell & Co. Three of
Sir William’s sons worked in the
firm, as did two of his grandsons,
including Peat’s father Sir Gerrard
Peat. Peat himself joined in 1972,
was made partner in 1985 and left
in 1993, having seen the practice
merge with Klynveld Main
Goerdeler to become KPMG. 
Accountancy is clearly in his
blood – but given that he says he
followed in his forebears’ footsteps
because his father expected it
rather than of his own volition,
it’s possible it takes second place to
duty. “I didn’t play an active role in
shaping my career until I was 61.
Prior to that – and even at Oxford,
where I studied law – I responded to
expectations and followed life along
the paths it took me.”
That may sound a little passive,
until you consider how golden
those opportunities were: there
can’t be many who would veer away
from a path that led from Eton to
Oxford, to an MBA at INSEAD, to a
career in a worldwide accountancy
firm, and then on to serve Queen
and country as Keeper of the Privy
Purse, followed by nine years as
private secretary to the Prince of
Wales. Might they have been the
choices he would have made even
without the weight of his family’s
influence?
“It’s impossible to say, but
perhaps. I’ve certainly always felt
MARCH 2018 ECONOMIA

“The Royal Household needs to be run in
a business-like way, but it is not a business.
Its purpose is not to make a profit. Its
purpose is to support the Queen in fulfilling
her duties as head of state”
enormously fortunate. I have had
the best education, and that counts
for so much; and I came on to
the jobs market when there was
plentiful employment. I also hope
and believe that I benefited and was
shaped, to a considerable degree,
by my accountancy training. I have
always thought that the big
practices are, in many ways, the
world’s business schools, providing
the people who are at the heart of
much of our global economic
activity and prosperity.”
Peat did mainly auditing and
financial advisory but also
consultancy and other assignments
for clients, and that combination of
skills made him the perfect person
to take on a management study of
the Royal Household when KPMG
was appointed in 1987.
His report ran to more than 1,300
pages and included some 200
recommendations. When it was
completed, says Peat, “The client
said to me, in summary, ‘if you
think so much needs to be done,
why don’t you come and do the job
yourself ?’ So I did, first while still
working full-time at KPMG, and
then, from 1990, while on
secondment from the firm. By the
time we got to 1993, the decision
was made that I should join the
Royal Household on a permanent
basis.” He was first director of
Finance and Property Services and
then became Keeper of the Privy
Purse in 1996.
Peat balks at the suggestion that
the Royal Household is a business.
“No, I wouldn’t say that. In financial
and people terms it is a very
substantial organisation that needs
to be run in a business-like way, but
it is not a business. Its purpose is
not to make a profit. Its purpose is
PHOTOGRAPHY BY MATTHEW JOSEPH
to support the Queen in fulfilling
her duties as head of state.”
He is not one to trumpet his
achievements, saying only that the
economies he instigated reduced
the Royal Household’s net
expenditure by around 70%
and helped professionalise
ECONOMIA MARCH 2018
management. The key to the
process was reassuming direct
responsibility for functions and
expenditure that had been
delegated, over centuries, to
government departments – a form
of privatisation. Responsibility
for managing the Civil List itself
and for the buildings and transport
were taken on and efficiencies
introduced. The building work
included the restoration of Windsor
Castle after the 1992 fire and, across
the estate, probably the largest
programme of work for 100 years
or more. Buckingham Palace and
further parts of Windsor Castle
were also opened to the public and
the Royal Collection Trust was
created to display the works of art.
He was also the author of the
arrangements, working with
the Treasury and Inland Revenue,
whereby the Queen offered to pay
income and capital gains tax on
a voluntary basis in 1993 – a move
that was as much political as it
was financial, and which gave the
monarchy a boost in public esteem.
Peat always felt that he might go
back to business at some stage.
“I had it in mind to return to the
private sector after I had completed
my work for the Queen,” he says;
“but then the Prince of Wales kindly
asked me to join his staff.”
If his years working for Her
Majesty were defined by saving
money, then certainly part of his
remit as private secretary to Prince
Charles was to make money: in his
nine years with the Prince, from
2002 to 2011, Charles’s income
more than doubled.
Now back in the private sector,
he is no less busy. He is chairman
of CQS, Sir Michael Hintze’s £11bn
asset manager, and holds
directorships with Evraz, Deloitte,
M&C Saatchi, GEMS Education and
Arbuthnot Latham, as well as being
a trustee of the Hintze Family
Charitable Foundation and of
the Saïd Foundation. “I also have
another job,” he says, “and that’s
farming. It’s a good antidote.” ○
THE ACA
AN OUTSTANDING
ACHIEVEMENT
Sir Michael Peat has received
the ICAEW Lifetime Award for
Outstanding Achievement in
recognition of a career devoted to
the promotion of accountancy as a
force for good, his services to the
Royal Household and, in particular,
for his roles in establishing HRH
The Prince of Wales’ Accounting
for Sustainability and Integrated
Reporting projects. These were
both created to help the business
community and public sector
recognise the benefits of considering
the environment and wider society in
their day-to-day practices.
“HRH had been reading Nicholas
Stern’s report on the economics of
climate change, which concluded
(in very broad terms) that they
could be the greatest ever failure of
market mechanisms,” says Peat. “He
suggested to me that they could
also be described as the greatest
ever accounting failure, because
accountants had failed to price and
quantify the irreplaceable public
utilities – fresh water, a clean and
functioning atmosphere, biodiversity,
fish in the sea – that were being
consumed and degraded so rapidly.
It was a good point, and as a result
of HRH’s drive and determination,
the Accounting for Sustainability and
Integrated Reporting projects came
into being.”
Prince Charles was made the
first honorary member of ICAEW
in recognition of his work and now
Peat has been given the Lifetime
Achievement Award. “Receiving
the Award is a great honour and
pleasure because it is recognition by
my colleagues,” he says. “I owe a lot
to accountancy and the profession.
It has been a continuous learning –
business nomadic – experience and
a wonderful mix of the practical
and the intellectual, all in the
company of intelligent, stimulating
and decent people. I have much to
be grateful for.”
61
Technical
key developments
Our at-a-glance guide to the latest
measures members need to know
AUDIT AND ASSURANCE
ICAEW UNHAPPY WITH
AUDIT STANDARD-SETTING
PROPOSALS
ICAEW has “significant concerns” about
the Monitoring Group’s consultation on
the current international audit standard-
setting model, its oversight and whether
it is operating in the public interest.
The Monitoring Group (MG) needs to
define what it means by public interest,
which it fails to do despite frequent
references to it. In its response, REP 17/18,
ICAEW says a consultation needs to
address the fundamental question of
what best serves the public interest in
terms of audit, whether audit is fit for
purpose and how it might evolve to serve
society better. Merely tinkering with the
standard-setting process does nothing
to alleviate the problem.
ICAEW points out that, at the recent
outreach event in London, members of
the MG said that they had confidence in
the current standards produced by the
International Ethics Standards Board for
Accountants (IESBA) and the International
Auditing and Assurance Standards Board
(IAASB). This contradicts the premise of
the consultation paper, which argues
there is a need for change since standards
are not being developed in the public
interest because of the involvement of
the profession in the current process. This
premise is neither evidenced nor merited.
One area of agreement is over the
MG’s suggestion that multi-stakeholder
oversight is important at all levels of the
process. However, the MG does not go
far enough: it only mentions three sets
of stakeholders – regulators, users and
62
auditors – yet for standards to be effective
and workable, diverse involvement from
the profession and others in the standard-
setting boards is essential. This applies
equally to oversight. Regulators and
institutional investors focus on capital
markets and listed companies but audit
standards go beyond this narrow scope.
They encompass non-audit assurance
services and apply to SMEs and other
unlisted organisations that may have very
different needs and circumstances.
ICAEW also rejects the idea of one
standard-setting board for both audit
standards and audit ethical standards.
This would be counterproductive
because it would dilute expertise, risk
conflicting ethical standards for the
profession as a whole and result in an
unwieldy agenda that would distract
attention from forward-facing issues,
such as technological change.
icaew.com
THE USE OF DISCLAIMERS
IN AUDIT REPORTS
ICAEW is planning to update its technical
release setting out the current thinking
on audit reports and the auditors’ duty
of care to third parties in the light of the
High Court decision in Barclays Bank
v Grant Thornton. It believes that the
Barclays decision endorses the approach
it has been recommending to members
since 2003 following the earlier Scottish
judgment, Royal Bank of Scotland v
Bannerman Johnstone Maclay.
Bannerman highlighted the potential
exposure of auditors to third parties who
assert they rely on audit reports where
the auditors have failed expressly to
disclaim responsibility to those third
parties. The Barclays case concerned
non-statutory audit reports that Grant
Thornton had prepared, which were
passed on to the bank. Barclays alleged
that the reports had been prepared
negligently and it had suffered loss as
a result of relying on them. Although
there was no contract between them,
Barclays claimed that Grant Thornton
must have known that the reports would
be passed on to it and therefore the firm
owed it a duty of care in tort.
However, there was a Bannerman-
style disclaimer in the reports and Grant
Thornton applied for the claim to be
struck out on the grounds that this
made it impossible for Barclays to prove
it was owed a duty of care. The judge
agreed and effectively held that users
of audit reports could be expected to
be commercially sophisticated parties
and there was no good reason not to
give effect to the terms of a clearly
expressed disclaimer.
The technical release will remind
auditors that the absence of a disclaimer
could be interpreted as an assumption of
responsibility for the audit report to a third
party. It recommends that auditors who
wish to manage the risk of liability to third
parties should continue to use disclaimers
and also provides appropriate wording.
ICAEW is also considering the most
appropriate placing for the disclaimer.
icaew.com
NEW AUDIT HELPSHEETS
ICAEW’s Audit and Assurance Faculty
has published three new documents
in its series of audit helpsheets.
The first helpsheet, Preparing an Audit
Report for Micro-Entities, explains the
main changes that should be made to
the audit report of a company preparing
its financial statements under the micro-
entities regime.
The second one, Audit Report on
Defective Financial Statements, sets out
the main changes necessary to produce
an audit report on a set of defective
accounts prepared in accordance with
regulations under the Companies
Act 2006 (CA 2006).
The third helpsheet, Preparing an Audit
Report with a Disclaimer of Opinion,
explains the key changes that need to be
made to the audit report when an auditor
decides to disclaim the opinion on the
financial statements as a whole.
icaew.com/auditandassurance
END OF AN AUDIT
ERA FOR CIPFA
The Chartered Institute of Public Finance
and Accountancy (CIPFA) no longer has
any members who hold a CIPFA-awarded
MARCH 2018 ECONOMIA

audit qualification. As a result, it has
consented to the Financial Reporting
Council (FRC) revoking its recognition
as an audit qualifying body under the
provisions of the CA 2006. The revocation
came into effect on 18 December 2017.
CIPFA, which has been a qualifying
body since 2005, is the only professional
accountancy body in the world exclusively
dedicated to public finance. It has 14,000
members but those who are involved in
audit tend to hold an audit qualification
under different statutory frameworks to
the Companies Act. CIPFA stressed that
the agreement with the FRC to revoke
recognition did not affect its ongoing
RQB registration under the Local Audit
and Accountability Act 2014.
frc.org.uk
BUSINESS
SHARE BUYBACKS
The government has commissioned
PwC to carry out research into whether
companies buy back their own shares as a
means of artificially inflating executive pay.
The move is part of the corporate
governance reforms announced in
August last year that are designed to
curb excessive pay packages in the
boardroom. It is in response to growing
concerns that a minority of companies
are misusing the scheme – which enables
companies to buy back shares from the
market, often to reduce the number
available to increase their value.
The PwC research will seek to
understand how companies use share
buybacks, which can also be for valid
reasons, and make recommendations,
if necessary, for further action to be taken
to prevent abuse.
gov.uk
HMRC SUPPORT FOR
BUSINESSES AFFECTED
BY CARILLION
Companies that are worried about their
ability to pay their tax following the
collapse of Carillion can get help and
practical advice from HMRC. In the first
instance, they should contact Business
Payment Support Services (BPSS) on
0300 200 3835. The service is open
seven days per week between 8am and
8pm on weekdays and 8am to 4pm on
Saturdays and Sundays.
The BPSS can: agree instalment
arrangements for those companies
that can’t pay on time; suspend any
debt collection proceedings; review
penalties for missing statutory deadlines;
reduce any payments on account; and
ECONOMIA MARCH 2018
agree to defer payments due to short-
term cash flow difficulties.
gov.uk
FRC REMINDS COMPANIES
OF REPORTING OBLIGATIONS
In the wake of the collapse of Carillion in
January, the FRC has issued a reminder
to companies, particularly those in the
construction and business support sectors,
about their reporting obligations.
In a six-page overview of the current
accounting and reporting framework,
aimed at the board, the UK regulator
highlights the need for reports and
accounts to provide sufficient, clear and
relevant information. Users, it says, must
be able to understand the company’s
performance, financial position and
prospects, and have enough information
to assess its going concern status and its
longer term viability.
The document focuses on the going
concern basis of accounting, risk and
viability reporting and the judgements
and estimates used in preparing the
financial statements. It also considers
the need to provide users with clear
information on the levels of debt, cash
flows and the conversion of operating
profits into cash.
Last autumn, the FRC announced
that it would be targeting construction
and business support services as two
of its priority sectors for 2018/19. This
means it will take such companies into
consideration in its forthcoming regular
audit quality review, corporate reporting
review and thematic activities.
frc.org.uk
IMPLEMENTATION OF GDPR
LEGISLATION
New data protection legislation comes
into force on 25 May 2018. It replaces
the Data Protection Act and requires
organisations to ensure the data they hold
is audited, well documented and that data
collection procedures are compliant.
Under the General Data Protection
Regulation (GDPR), data processors
will have to maintain records and are
directly liable if they are responsible for
a breach, while data controllers face new
obligations including a duty to ensure that
their contracts with processors comply
with the GDPR. Organisations will also
have to show that they comply through
documentation and carry out privacy
impact assessments to assess the risk to
individuals’ rights. The regulation also
provides enhanced rights for individuals,
including the right to be informed,
object and be forgotten as well as rights
regarding access, rectification, erasure,
TECHNICAL: UPDATES
restrictions on processing, data portability
and automated decision-making.
There are swingeing penalties for non-
compliance, including a maximum fine
of 4% of global annual turnover.
ICAEW has an online GDPR hub
with checklists and information about
implementation. It also contains a link
through to a webinar recorded at the
end of January which answers a number
of frequently asked questions about
the legislation.
icaew.com/gdpr
BREXIT SCENARIO PLANNING
ICAEW has published a checklist for
businesses to help them with contingency
planning ahead of Brexit next year. It
says that leaving the European Union will
“bring opportunities as well as challenges
and every change will involve choices that
could benefit the business”.
The list includes: movement of goods,
which covers customs and supply chains;
product compliance; contracts; people;
and financial planning. Each section
provides links to more information.
ICAEW suggests businesses use the
checklist to identify both positive and
negative possibilities and then plan how
to address them. “Contingency planning
is about filtering,” it says. “Identify the
issues that you plan to do something
about, those you will keep a watching
brief on, and those you are happy to
accept with no action.”
icaew.com/brexit
PRIVATE BUSINESS GETS ON
CORPORATE GOVERNANCE
CODE
Wates Group chairman James Wates is to
head up a government-backed industry
group tasked with drafting the UK’s first
set of guiding principles for corporate
governance for large private companies.
According to business secretary
Greg Clark, a number of large private
companies are “falling short” of the high
standards expected of them, in particular
by ignoring employees’ concerns. The
aim of the voluntary principles is to
ensure that these companies follow
best practice in corporate governance
and build public trust through better
transparency and accountability.
Wates will work with a coalition of
nine organisations, including the FRC,
the Institute of Directors, the CBI, the
TUC and the Investment Association,
on the project. In taking on the new role,
he expressed the hope that the standards
would “help promote and enable ever
stronger and more consistent corporate
governance among large private
63
companies, which generate significant
value for the UK economy and society”.
This year will also see implementation
of legislation requiring all large companies
(2,000 or more employees or turnover
above £200m and a balance sheet of
more than £2bn) to show their responsible
business arrangements.
GENDER DIVERSITY
INDICES LAUNCHED
Global index provider FTSE Russell has
launched a new index that will measure
gender diversity leadership at boardroom
level. The FTSE Women on Board
Leadership Index Series will increase
exposure to companies in relation to the
gender diversity on their boards and also
how well they are managing their wider
social impact.
The first two indices within the series,
the FTSE All-Share Women on Boards
Leadership Index and the Russell 1000
Women on Boards Leadership Index,
will assess companies’ gender diversity
adjustment – the ratio of female board
members to total number of board
members – and social impact adjustment,
based on their social pillar score.
These initial indices are based on the
FTSE UK All-Share and Russell 1,000,
and can be used by market participants
to increase their exposure towards
companies demonstrating leadership
in this space. They will also enable
investors to achieve increased exposure
to companies which demonstrate
gender diversity leadership and strong
social impact.
Royal Dutch Shell, BHP Billiton, Royal
Mail, Unilever, GlaxoSmithKline, Kingfisher,
BT, SEE, Jupiter Fund Management and
Micro Focus International have received
the highest combined gender diversity
and social impact scores within their
own industries.
ftserussell.com
FCA CONSULTS ON
REDRESS FOR SMES
The Financial Conduct Authority
(FCA) has come up with proposals to
improve the access of SMEs to dispute
resolution services that are independent
of the financial firm of which they are
customers. It is proposing to allow around
160,000 more SMEs to use the Financial
Ombudsman Service (FOS) on the same
grounds as individuals and micro-entities.
The thresholds for eligibility will be set
at fewer than 50 employees, an annual
turnover of under £6.5m and an annual
balance sheet of under £5m.
As part of its consultation, the FCA also
wants views on whether it should raise the
64
FOS binding award limit from the current
£150,000, and whether it should ask for a
change in insolvency law so that directors
of businesses that have been dissolved or
are in insolvency proceedings can ask for
redress from the FOS.
The deadline for comments regarding
the consultation is 22 April.
fca.org.uk
THE PROFESSION
FRC ENFORCEMENT PROCESS
The FRC has published a useful slide
that explains the progress of a complaint
through the seven stages of the
enforcement process.
The FRC’s Enforcement Process also
explains that a settlement can be reached
at any stage of the process and that the
executive counsel (currently barrister
Claudia Montimore on an interim basis)
can choose to close a case at any time
during the investigation if she decides
that the tests have not been met.
frc.org.uk/publications
REPORTING
STREAMLINED ENERGY AND
CARBON REPORTING
Proposals from the Department of
Business, Energy and Industrial Strategy
(BEIS) designed to streamline energy and
carbon reporting, could well end up just
adding to the confusion among users and
preparers particularly given the number
of competing initiatives for change in the
reporting arena.
In REP 01/18, ICAEW explains that part
of the problem is that the department
has not communicated clearly what the
primary objective of its policy is. “Without
a clear and well-understood objective, it
is very difficult to determine whether or
not additional information is needed
over and above existing reporting
requirements/initiatives, or whether the
proposed reporting requirements are
appropriate,” it says.
ICAEW takes BEIS to task over its failure
to consider in detail the effectiveness
of existing reporting requirements
and initiatives. And it suggests that the
government should take a more joined-
up approach when developing policy
and take on board initiatives, such as the
development of the Financial Stability
Board recommendations of the Task Force
on Climate-related Financial Disclosures.
ICAEW also makes it clear that the
annual report is not the place to put
the proposed information on energy
and carbon use. Instead, this detailed
information should be presented on the
company’s website or preferably on a
government-sponsored website and any
discussion in the strategic report could
then cross reference to it. It stresses
that the annual report should remain
a coherent, stand-alone document
aimed at current and potential capital
providers, “free of clutter and preferably
without information that is required by
government or regulators primarily to
meet other public policy objectives”.
icaew.com/representations
GENDER PAY GAP REPORTING
From 4 April 2018, companies with 250
employees or more will be required to
publish an annual report regarding
their gender pay gap.
Under the new rules, they will have
to publish six metrics: these include the
average hourly pay for both male and
female employees, the average bonuses
paid, the proportion of men and women
receiving the bonuses and the proportion
of male and female employees in each of
four different pay quartiles.
ICAEW guidance on gender pay gap
reporting says that organisations should
be fully prepared to provide meaningful
explanations for their figures and be
prepared for the potential of a backlash
from employees, clients and other
interested parties.
icaew.com
LARGE COMPANIES’ PAYMENT
PRACTICES REPORTING
Under the Small Business Enterprise and
Employment Act 2015, large businesses
must report on their payment practices
and policies on a six monthly basis. They
are considered within scope if they exceed
at least two of the following: a £36m
annual turnover, £18m balance sheet
total, and 250 employees.
The new duty came into operation for
financial years starting on or after 6 April,
2017, but no business was required to
report in its first financial year. This means
that businesses will shortly find themselves
having to report for the first time.
The information required – which
businesses will have to publish on a web-
based service provided by government
within 30 days of the end of the reporting
period – covers a narrative description
of the business’s standard payment
terms, which must include: the standard
contractual length of time for payment
of invoices; the maximum contractual
payment period and any changes to the
standard payment terms in the reporting
period; and how suppliers have been
MARCH 2018 ECONOMIA

notified or consulted on these changes.
They will also have to provide a narrative
description of the business’s process for
resolving disputes related to payment.
Additionally, they will have to produce
statistics on: the average number of days
taken to make payments in the reporting
period, from the date of receipt of
invoice or other notice; the percentage
of payments made within the reporting
period that were paid in 30 days or
fewer, between 31 and 60 days, and
61 days or longer; and the percentage
of payments due within the reporting
period that were not paid within the
agreed payment period.
The businesses will also have to reveal
whether suppliers are offered e-invoicing;
supply chain finance is available to
suppliers; the business’ practices and
policies cover deducting sums from
payments as a charge for remaining on a
supplier’s list, and whether they have done
this in the reporting period; and whether
the business is a member of a payment
code, and the name of the code.
gov.uk
IFRS 9 IMPLEMENTATION
ISSUES
IFRS 9, Financial Instruments, came
into effect for all annual periods
beginning on or after 1 January this
year. Implementation has raised a huge
number of questions about how to deal
with issues such as volatility, consistency,
comparability, assumptions, disclosures,
pro-cyclicality and which is more important
– the P&L or capital impact?
The ICAEW Financial Services Faculty
has published a report based on many
of the issues worrying preparers. IFRS 9
Bulletin also emphasises the importance
of not underestimating the impact of
classification and measurement – it relates
one case where the increase in provisions
was more than offset by the reclassification
and newer measures, thereby actually
increasing the bank’s capital strength.
icaew.com/fsf
TAX
TAX-FREE CHILDCARE NOW
EXTENDED
The roll-out of Tax-Free Childcare
continues with families now eligible to
claim it whose youngest child is either
under nine or turned nine on or after 15
January. Eligibility is also extended to
families with children under 12 or who
turned 12 on or after 14 February 2018.
However, all eligible parents, including the
self-employed, will need to apply online
ECONOMIA MARCH 2018
for the scheme (childcarechoices.gov.uk)
before the end of the financial year.
Tax-Free Childcare helps working
parents with the cost of childcare with up
to £2,000 of support per child per year,
or £4,000 per year for disabled children.
gov.uk
GUIDE TO HMRC’S AML
ENFORCEMENT POWERS
HMRC has issued guidance on how it
intends to use its enforcement powers
under The Money Laundering, Terrorist
Financing and Transfer of Funds
(Information on the Payer) Regulations
2017. It says that it will use its enforcement
powers in the same way as under the
Proceeds of Crime Act 2002 and Sch 7 of
the Counter Terrorism Act 2008, and that
any breach of the regulations may
be treated as a criminal matter.
According to the guidance, Anti-money
Laundering Supervision: Enforcement
Measures, HMRC’s approach is risk-
based and has three strands. The first
is to promote compliance by helping
businesses to implement appropriate
controls to counter the threat that they
may be used by criminals to launder
money or fund terrorism. The second
strand is to prevent non-compliance by
making sure that businesses’ processes
and interactions with customers help
them stay on the right side of the law.
HMRC adds that it will challenge high risk
businesses and those with inappropriate
controls to put things right.
The third strand is to respond to non-
compliance by treating non-compliant
businesses in a way that encourages
sustained compliance in future. It warns
that it will de-register criminally complicit
businesses and illegitimate business
models.
gov.uk
STANDARD FOR TAX AGENTS
HMRC has revised its standard for
agents to take on board the Professional
Conduct in Relation to Tax (PCRT) code,
which came into effect for members of
seven professional bodies on 1 March
last year.
The updated standard sets minimum
standards for tax agents who are not
members of a professional body and
will not affect tax practitioners who
are covered by PCRT. In particular, it
incorporates the rule that “agents must
not create, encourage or promote tax
planning arrangements or structures
that: set out to achieve results that are
contrary to the clear intention
of parliament in enacting relevant
legislation; and are highly artificial or
TECHNICAL: UPDATES
highly contrived and seek to exploit
shortcomings in the relevant legislation”.
gov.uk
WELSH TAXES READY
TO GO LIVE
The UK and Welsh governments have
confirmed that the first Welsh taxes for
almost 800 years will go live on 1 April
2018. From that date, Stamp Duty Land
Tax (SDLT) and Landfill Tax will be
replaced by Land Transaction Tax (LTT)
and Landfill Disposals Tax in Wales. 
The threshold for a residential property
after which LTT becomes payable is
£180,000, which compares with the
threshold at which SDLT becomes
payable (except the relief for first time
buyers) which is £125,000. However, the
average property price for a first-time
buyer in Wales is £135,000, well below
the new threshold. Existing property
owners in Wales will not avoid the 3%
additional rate of SDLT which will be
transferred across to LTT.
There are different thresholds and rates
for commercial property and farmland.
From April 2019 the UK government
will also devolve the right to the Welsh
government to set income tax rates.
The Welsh government is also
considering introducing other taxes
in the country, such as tourism tax,
disposable plastic tax, a social care
levy and a soft drinks industry level.
gov.uk
SCOTTISH VARIABLE TAX RATE
From 6 April 2018, the income tax rate
for Scottish taxpayers will change to
include starter and intermediate rates.
While earnings up to £11,850 will be
tax free (the personal allowance), earnings
between £11,851 and £13,850 will be
taxed at the starter rate of 19%.
Earnings between £13,851 and £24,000
will be taxed at 20% (the basic rate);
between £24,001 and £44,273 at 21%
(intermediate rate); and between £44,274
and £150,000 at the higher rate of 41%.
Earnings above £150,001 will be taxed
at the additional rate of 46%.
Taxpayers will also find that their
personal allowance is reduced by £1
for every £2 earned over £100,000.
gov.scot
65
An unnerving
A
s of July last year, the government’s
ambitious programme to digitise
the UK taxation system gained a

workload new poster child in the form of VAT.

Incoming financial secretary to
the Treasury Mel Stride yielded to arguments that
The tight timeframe for April 2019 was too early to introduce Making Tax
Digital (MTD) in full and pushed the requirement
Making Tax Digital for VAT for MTD for income and corporation tax back to
presents challenges for 2020. The enormity of the task of bringing UK
VAT-registered businesses in line with the new
taxpayers, accountants and requirements by the April 2019 deadline still looms
HMRC. Liz Loxton reports large, however.
In mid-December, the government published its
draft legislation for making VAT digital. The Value
Added Tax (Amendment) Regulations 2018 state that
from 1 April 2019, VAT-registered businesses will be
required to keep and preserve digital records and
provide VAT returns using software compatible with
the HMRC’s systems.
The draft legislation is one staging post in an ongo-
ing conversation between government, HMRC and the
profession, and there is evidence HMRC has listened,
says Anita Monteith, technical lead and senior policy
adviser in ICAEW’s Tax Faculty. The draft legislation
reflects some of the Institute’s concerns, she says,
including issues around the flat rate scheme and
retaining the extra seven days for paying VAT. “Where
they haven’t heard us is on the issue of mandation,”
she says. “ICAEW totally supports the move to digital,
but businesses will know for themselves when it is
best to make that step.”

THE RULES
In essence, MTD hinges on establishing a viable
doorway between the VAT accounting system that
a business might install and run and the HMRC’s
collection portal. Or, as the legislation terms it,
MTD requires “functional compatible software…
the functions of which include: recording and
preserving electronic records in an electronic form;
providing information to HMRC from the electronic
records and returns in an electronic form and by
using the API platform; and receiving information
from HMRC using the API platform in relation to
a person’s compliance with obligations under
these regulations.”
The draft legislation states that information may
only be submitted to HMRC via application program-
ming interfaces (APIs). These can be embedded
within accounting software, bridging software or
API-enabled spreadsheets. In an addendum, HMRC
has stated that the complete set of digital records to
meet MTD requirements do not have to be held in

Visit ICAEW’s dedicated MTD hub

icaew.com/MTD or our site for
opinion economia.icaew.com

66 MARCH 2018 ECONOMIA


one piece of software. Providing there
is a digital link between software,
records can be stored across different
compatible digital formats.
VAT’s quarterly reporting structure
may well be the feature that made it
an attractive candidate for MTD’s first
iteration. “Given there is already a
mechanism for quarterly reporting
on VAT, the assumption seems to have
been that MTD will be a small jump
for business,” says Monteith. “In fact,
there is a vast leap, including the need
for a digital accounting system.”
There is a concern that smaller VAT-
registered businesses may be put in
the position of buying software they
have little understanding of. The same
applies to yet-to-be VAT-registered
businesses. Once they cross the VAT
registration threshold, they have
little time to get their administration
and reporting up and running. “I
am concerned that people will buy
software too quickly, software unsuit-
able for their business,” says Monteith.
READINESS
While the profession may be acutely
aware of MTD and the 2019 deadline,
the same cannot be said for taxpayers.
“At this point few if any taxpayers are
prepared for MTD,” says John Forth,
indirect tax partner at RSM. “While
larger, more sophisticated taxpayers
with in-house tax teams are typically
aware of MTD, our experience is that
to date relatively limited resource or
effort has been allocated to consider-
ing the impact this will have upon
their VAT accounting from 1 April
2019. In terms of smaller businesses or
those with no in-house tax resource,
basic awareness of MTD is limited or
more often non-existent,” he says.
The danger of non-compliance
due to this low awareness should
not be overlooked. Androulla Soteri,
tax development manager at MHA
MacIntyre Hudson, says: “MTD has
changed course so many times now
that I think it’s a bit of a case of ‘the
boy who cried wolf ’: the profession
is at the point where it doesn’t quite
believe it’s going to happen, and some
smaller practitioners may be taking
the attitude that until they know what
ILLUSTTRATION BY STUDIO TAKEUMA
really is going to happen, there is not
much they can do to help clients. This
is a danger area that HMRC should be
addressing with software suppliers.”
A common response to the draft
legislation has been the lack of detail
on how exactly VAT-registered busi-
nesses will interface with HMRC. Alex
ECONOMIA MARCH 2018
“The profession is at
the point where it
doesn’t quite believe
it’s going to happen”
Androulla Soteri, tax development manager,
MHA MacIntyre Hudson
Millar, senior VAT consultant at Leeds
and York-based accountancy practice
Garbutt + Elliott, says the early pilot
for MTD for VAT, which started last
year, was on a very small scale.
“A larger scale pilot is due to
commence in spring 2018 and this
will provide a clearer idea of the
impact the new system will have on
businesses,” he says.
What’s more, HMRC has yet to
confirm which providers it is working
with, according to Soteri. “Up until
July last year, software houses were
working on developing their product
to meet the requirements of quarterly
reporting for income tax obligations.
That’s quite a different spec to the one
they have now regarding VAT. Despite
the recent detail released by HMRC,
software companies will be facing
considerable difficulties delivering
packages that are adequately tested by
the necessary time limits. Most busi-
nesses like to beta test and parallel
run new systems before relying upon
them, especially when it comes to
their finance function.”
There is an additional complexity.
The 1 April 2019 implementation date
suggests companies only need worry
about the first quarter falling after that
date. But companies are unlikely to
want to introduce new software
part-way through their accounting
period – a practicality that shortens
timeframes still further.
“Time is becoming tight. If the
timetables are to be adhered to, there
must first be more clarity from HMRC
around the rules. HMRC then has to
work rapidly with software suppliers
to enable them to develop adequate
updates and systems. If this does not
happen, many accountants will find
April 2019 a very testing time as they
try to fix the problem,” says Soteri.
According to HMRC’s own research,
only 11% of businesses currently use
software compatible with the MTD
requirements, so few would be in a
position to go live at the press of a
button. HMRC has said it will accept
use of spreadsheets so long as they
TECHNICAL: MAKING TAX DIGITAL
have APIs in place that push numbers
from those spreadsheets to the HMRC
system. It’s an important concession,
but it overlooks the complexity of VAT
accounting and reporting. “Businesses
that are partially exempt often use
spreadsheets in order to compute
their VAT liability,” says Soteri. “The
information on these spreadsheets can
represent a significant departure from
what is processed into any booking
software, as the calculations are
complex and can vary from return
to return. This is an area where the
recent concession by HMRC regard-
ing the use of API spreadsheets in
conjunction with software is likely
to be exploited.”
Given the complexities, accountants
in practice hope that HMRC will keep
its promise of a soft landing in terms
of MTD compliance. “I would expect
HMRC to take a light touch, possibly
until around 2020, in relation to
applying penalties, then take a tough
approach,” says Millar. “However, this
is not guaranteed and businesses
should prepare on the basis that
penalties will apply from 2019.”
BREXIT
The altered roadmap for MTD may
have pushed income tax and corpo-
ration tax out of the near term, but
making VAT the frontrunner for
this initiative brings in one massive
and unavoidable legislative clash
in the form of Brexit on 29 March
2019. Practising accountants will
doubtless regard the volume of
preparatory work that HMRC faces
to ensure both MTD for VAT and the
system for new Customs/VAT rules
are up and running by that date as all
but unsurmountable.
“Even with a soft Brexit, history has
told us HMRC might not be able to
achieve a work around for just MTD
for VAT by then,” says Soteri. “Real
Time Information (RTI) is a case in
point – initially, everything seemed
to work well but a lack of testing has
led to a lot of problems that are still
being ironed out.” ○
67

Changing
the guard
Among the many unknowns in the
process of divorce with the EU is what
will happen to UK GAAP after Brexit.
Among the stakeholders, there’s both
the scope – and appetite – for change,
as Caroline Biebuyck reports
68
T
oday’s financial reporting regime for
UK private companies comes from
different sources. Much UK company
law is rooted in EU legislation, with
many of the changes to the small
and micro-entity reporting driven by Brussels.
Meanwhile, private companies use FRS 102, a UK
standard based on the IFRS for SMEs. How might
these different components change after Brexit?
Calls for a full review of FRS 102 because of Brexit
are unlikely to be heeded. The standard, only intro-
duced a couple of years ago, does not have its roots
in EU law. What’s more, the Financial Reporting
Council (FRC) recently carried out a triennial review
of the standard (see right), which has sorted some
of the main problem areas for preparers.
But there’s still serious disquiet about some parts
of FRS 102. One of the biggest bugbears is how
section 1A, for small companies, puts constraints
on the number of disclosures that small companies
can make in their financial statements – constraints
that come directly from the EU’s accounting directive
of 2013 rather than from the IFRS.
MAXIMUM DISCLOSURES
Section 1A includes many areas in which the FRC
recommends disclosures but cannot mandate them.
The FRC’s hands were tied by the maximum number
of disclosures permitted by the accounting directive,
explains Paul Creasey, partner at Wilkins Kennedy.
“We now have a situation in which small companies
can produce accounts that are much shorter than
they were under the FRSSE. And bear in mind that
many more companies than previously fall into this
category, given the increase in thresholds.”
Matt Howells, head of the national assurance
technical group at Smith & Williamson, points out
that the FRC’s view was always that the minimum
number of disclosures permitted by section 1A was
too low: this is why the regulator included recom-
mended disclosures in the standard. “In areas like
this, where up to now they have been hamstrung
by EU legislation, I can see the FRC being happy to
set its own requirements and making more disclo-
sures mandatory.”
At the moment the onus is on small company
directors to work out whether various disclosures
are needed to give a true and fair view, says
Nigel Sleigh-Johnson, head of ICAEW’s Financial
Reporting Faculty.
“This isn’t helpful. Enabling the FRC to mandate
more disclosures could reduce the burden on small
company directors by giving them more clarity over
the section 1A requirements. These would not be
MARCH 2018 ECONOMIA

“This may be an
opportunity for the UK
to ask: what are we
trying to achieve with
a set of accounts?”
Matt Howells, head of national assurance
technical group, Smith & Williamson
new disclosures, but could enable the
FRC to say: this is what we think the
minimum requirement is for every
company.”
BACK TO BASICS
Longer term, Brexit could provide
a chance for the UK to think about
the direction its financial reporting
is taking, says Howells. “This may
be an opportunity for the UK to go
back to its statement of principles for
financial statements and ask: what
are we trying to achieve with a set of
accounts? How can we best commu-
nicate key messages to stakeholders?
This debate is already happening at
the IFRS level: this might be a good
time to consider the question for UK
GAAP too.”
He gives the example of financial
instruments. “When you’re trying
to communicate about these often
complex issues to users, is that better
done through disclosures rather than
with fair value accounting, where you
can end up with numbers that are
almost meaningless in themselves?”
Brexit might also allow for a more
detailed review of how information
should be published, says Jonathan
Compton, director, BDO financial
reporting advisory.
“This might be the time for us to
look at filing and disclosure require-
ments to see what should go into
an annual report and what might
be better published elsewhere. As
technology moves on, we might even
consider the relevance of the annual
report. The accounts we prepare
and read today are still based on the
original format. Perhaps this is the
opportunity to see whether that form
of reporting can be brought into the
21st century and whether the UK can
lead the way here.”
ILLUSTRATION BY ADAM AVERY
A first step could be in trying to
reduce proliferation and conflict
where there are many different
sources of reporting requirements,
says Howells.
“While this is worse for large, listed
companies, it’s an issue for smaller
ECONOMIA MARCH 2018
companies too. There’s the interaction
between company law and FRS 102,
also possibly section 1A, and then
companies can be caught by other
legislation such as payment practices
and narrative reporting requirements.
All these lead to complexity, duplica-
tion, confusion and a greater burden
– and cost – for preparers.
“There’s a case to be made for a
thorough review of the whole financial
reporting system and regulation to
see if it could be done in a more
coherent way.”
What are preparers’ priorities for
GAAP? Not surprisingly, they are
less concerned with accounting and
legal rules and far more focused on
the impact that Brexit will have on
their businesses, and how that will
be reflected in the accounts.
It’s not about how accounting will
change, but how to account for the
change, says Compton. “Companies’
concerns will be more on the opera-
tional and economic side. Practical
issues like taxation, exports and
access to labour will have an indirect
impact on the accounts.”
MANAGE RISK
Companies need to disclose judge-
ments and estimates in their financial
statements, says Creasey. “The biggest
of these is: what impact will Brexit
have on my business? Account
users will want to know what the
company is doing to manage that
risk, and how this might roll into going
concern issues.
“Large, public companies are better
placed to adapt and deal with this;
it’s more difficult for smaller, private
companies to plan for something if
they don’t yet know what they’re
planning for.”
Smith & Williamson has had a
number of conversations with clients
concerned about potential impacts.
Howells says: “A number of companies
who do a lot of trade within the EU
think they might need to renegotiate
contracts,” says Howells.
“Could that have an effect on
revenue recognition? A company that
has intellectual property in other EU
nations is unsure whether this will still
be protected after Brexit; does this
mean they will suffer an impairment?
And a UK holding companies with
EU subsidiaries is looking at possible
changes to dividend taxation and with-
holding taxes after Brexit, as these
could have deferred tax implications
in the accounts.” ○
TECHNICAL: UK GAAP
MORE CHOICE IN FRS 102
The Financial Reporting Council has
completed a consultation and review
process on FRS 102. The result was a
series of changes that covered some
of the bigger issues companies and
their accountants had faced with it.
The measurement of directors’
loans to small companies, simplified
under interim relief that the FRC
had granted earlier in the year, has
now been confirmed. There are now
more instances in which a financial
instrument can be measured at
amortised cost rather than fair value.
Investment properties rented to
another group company can also
be measured with reference to cost.
And fewer intangible assets need
to be separated from goodwill in a
business combination.
The reissued FRS 102 takes effect
for accounting periods starting on
or after 1 January 2019. However,
“companies can take advantage of
the dispensations immediately if
they choose to”, says Paul George,
executive director of the FRC.
It was not surprising that issues
became apparent with the new
accounting framework once it was in
place, says Nigel Sleigh-Johnson. “The
FRC changes are generally common-
sense simplifications that balance
efforts to reduce cost and complexity
in financial reporting with the need to
maintain usefulness of the accounts.”
Most medium-sized companies
will welcome the changes to FRS 102,
says Paul Creasey. But did the changes
go far enough? “For instance, no one
really likes the treatment of loans with
group companies and related parties
that are below market rate.”
The FRC does not intend to go
through a thorough review for
another four or five years, says George.
“However, if something gets drawn to
our attention which we believe needs
urgent action, we could consider a
single-issue amendment.”
Do you have a question about this
feature or the implications of Brexit?
Email us at economia@icaew.com
69
You ask the question,
we find the answer
In the second of a new practice Q&A series, we ask the
experts about cryptocurrency, auto-enrolment and
the skills chartered accountants will rely upon
There are many forces
shaping accountancy
practices, from regulation
and skills to technological
advancement and
economic change. If you
have a question or need
advice about any of these
things and more, please
email us at economia@
icaew.com and we’ll find
the answer for you
70
Q: WHAT IS THE DEFINITION OF
CRYPTOCURRENCY, HOW DO WE
ACCOUNT FOR IT AND WHY IS THERE
NO ACCOUNTING STANDARD?
A: A cryptocurrency is an online-only asset
tracked through a distributed ledger system,
usually blockchain. The best-known example is
bitcoin. Cryptocurrencies don’t have a central
bank or government backing, but instead derive
their trustworthiness from cryptography – that is,
computer-based security algorithms. The value
of cryptocurrencies derives from their scarcity,
security, and lack of restrictions on transfer.
Some new companies and products are seeking
enterprise funding through “Initial Coin Offerings”,
in which units of a new cryptocurrency created by
the company are sold to fund it, sometimes but not
necessarily in exchange for ownership or control
rights in the entity. These ICOs are high-risk as there
is presently no regulation or protection for investors.
Cryptocurrencies fall short of the definition of
cash and cash equivalents due to issues around their
volatile valuation, low liquidity into regular curren-
cies, and relatively small number of outlets that
accept them. However they aren’t fundamentally
different from other kinds of assets and as such
no specific standard has been deemed necessary.
For most businesses, they should be treated as a
commodity (so as inventory or an intangible asset
depending on the entity’s business model) and
valued at initial cost less any impairments.
An entity that trades in bitcoin, or a “mining”
company that operates hardware to run a cryptocur-
rency in exchange for some newly created ones,
might instead account for their cryptocurrency
holdings at fair value through profit and loss. Any
entity with significant holdings or transactions
should consider appropriate disclosures about their
activities in this area.
David Lyford-Smith, technical manager, IT & the
profession in ICAEW’s IT Faculty
icaew.com/itfac
Q: WHAT DO I NEED TO KNOW ABOUT
AUTO-ENROLMENT COMPLIANCE? 
A: Advising employers on pension scheme selection
is not regulated investment advice so practitioners can
do this without FCA authorisation or a DPB licence,
but the regulatory position will depend upon all the
circumstances of any given case. An unauthorised
accountant can also have general discussions with
employees on the different types of pension products
available, but cannot discuss the merits or suitability
of a specific pension contract, or recommend specific
personal pension contracts.
The distinction between an employer and its
employees may be a fine one, particularly in the
case of micro-businesses. To mitigate the risk of
inadvertently providing investment advice, you could
specify in your engagement letter that any advice to
an employer is provided to them in their capacity as
an employer and not as an individual.
If you are helping clients write to staff about
automatic enrolment and their rights, using letter
templates (for example generated by payroll software)
will help prevent you inadvertently giving investment
advice. If a practice decides it is not sufficiently skilled
to identify a suitable pension scheme, they may
choose to use a Permitted Third Party (PTP). If the
practice has a DPB Licence, it can effect introductions
to the PTP and also comment on the advice given.
Where a member is offering a payroll solution
linked to a single or limited number of pension
schemes (or is otherwise restricting/influencing
scheme choice, for example, via differential charg-
ing structures to reflect payroll compatibility), they
should make their employer clients aware there may
be other pension schemes available. They should
also make their clients aware of the need to assess
the various factors, clearly state the extent to which
the practitioner has or has not assessed the client’s
specific needs against these and ensure the employer
accepts responsibility for scheme selection.
Liz Cole, ICAEW business law manager
icaew.com/auto-enrolment
MARCH 2018 ECONOMIA
 TECHNICAL: PRACTICE Q&A

Q: WHAT SKILLS WILL THE “Professionals will need to think

CHARTERED ACCOUNTANT critically about the reliability of data
OF THE FUTURE NEED?  
and identify any gaps. These are likely
A: Making Tax Digital, increased to be critical skills for advisory work”
audit thresholds and the use of data Alison Stiles, head of business development, ICAEW
analytics in audit mean the smaller
practice of the future will focus more
on advisory than compliance work.
Chartered accountants will need
strong client engagement skills, as
well as analysis, interpretation and
communication skills – and will need
to develop them quickly.
ICAEW has refreshed the profes-
sional skills development part of ACA
training, following consultation in the
UK and internationally. It gives greater
prominence to key professional skills
for advisory work in an age of rapid
technological change – adaptability,
critical thinking, insight, perspective
and lifelong learning.
Professionals will need to think
critically about the reliability of data
and identify any gaps. These are likely
to be critical skills for advisory work.
The 2018 ACA syllabus incorporates
topics including data analytics,
making tax digital, cloud accounting,
and cyber security. Students need to
identify the commercial opportunities
and risks these technologies create
for clients, evaluate them, and
communicate their conclusions and
recommendations. Long recognised
for the breadth and depth of technical
knowledge and professional skills it
develops, the ACA will retain its
relevance as we shift to advisory roles.
Alison Stiles, head of business
development, ICAEW

Five in brief

01
Gender pay gap
Companies with 250 or
02
GDPR
New data protection
03
MTD pilots
Making Tax Digital
04
Non-financial
reporting directive
05
Risk and viability
reporting
more employees have regulations come into for VAT live pilots are New narrative This will be a key focus
until 4 April 2018 to force on 25 May 2018. expected to start in reporting requirements area for the Financial
publish six pay metrics These replace the Data April 2018. This will for “public interest Reporting Council
including average Protection Act and give HMRC a year to entities” are effective in 2017/18 reports.
hourly pay for male require organisations iron out any glitches for periods beginning A recent Financial
and female employees, to ensure the data in the system that will on or after 1 January Reporting Lab report
ILLIUSTRATION BY ANDREA MANZATI

average bonuses paid, they hold is audited, be mandatory for VAT 2017. Listing rules also encourages best
the proportion of men well documented and registered businesses now require disclosure practice.
and women receiving that data collection over the VAT threshold of board diversity frc.org.uk
bonuses and the procedures are in April 2019. policy (Disclosure and
proportions of male compliant. There are icaew.com/mtd Transparency Rules
and female employees swingeing penalties for TR 7.2).
in each of four pay non-compliance. frc.org.uk
quartiles. acas.org.uk icaew.com/gdpr

ECONOMIA MARCH 2018 71

Disciplinary
Listings
These reports are summaries.
Further information is available from
icaew.com/publichearings or from
the Professional Conduct Department,
ICAEW, Metropolitan House, 321
Avebury Boulevard, Milton Keynes
MK9 2FZ
DISCIPLINARY COMMITTEE
TRIBUNAL ORDERS
Man Ghung Siman Ng, Room 1502,
Double Building, 22 Stanley Street,
Central, Hong Kong Island,
Hong Kong SAR
Complaint On behalf of his firm, he
issued audit opinions in respect of the
2008 and 2009 accounts of a client
company when the audits were not
conducted in accordance with various
Hong Kong Standards on Auditing
(HKSA). As far as the 2008 accounts were
concerned, he failed to obtain sufficient
appropriate audit evidence to be able to
draw reasonable conclusions regarding
the existence of the exploration rights
to the C Mine in breach of HKSA 500,
Audit Evidence, and he failed to plan
and perform the audit with an attitude of
professional scepticism regarding the fair
values of the D Mine and C Mine in breach
of HKSA 200, Objective and General
Principles Governing an Audit of Financial
Statements. He also failed to properly
assess whether the company’s use of the
revaluation model on the subsequent
measurement of the D Mine and C
Mine was appropriate to the company’s
business and/or consistent with industry
practice. This did not comply with HKSA
315, Understanding the Entity and Its
Environment and Assessing the Risks of
Material Misstatement.
He repeated the breaches of HKSA
200 and 315 when carrying out the audit
of the 2009 accounts.
Proceedings were brought against him
and his firm by the Hong Kong Institute of
Certified Public Accountants (HKICPA). He
admitted the complaints and he was fined
HK$100,000 (£9,213).
He also wrote to ICAEW admitting the
complaint. In reaching its decision on
sanctions, the tribunal said that, although
the Guidance on Sanctions says the
72
starting point for seriously defective audit
work is exclusion and a fine of between
£5,750 to £11,500, it would take on board
the sanction already imposed by the
HKICPA. It therefore considered a severe
reprimand was, in the light of the way the
matter was dealt with in Hong Kong, the
appropriate and proportionate sanction.
Order Severe reprimand, £10,000 fine,
£6,500 costs.
Paul Singleton, Riverdale, 89 Graham
Road, Sheffield S10 3GP
Complaint He failed to act in a
professional manner, in breach of s150.1
of the Code of Ethics, as a result of using
offensive language toward a former client
and their partner on the evening of 27
June 2015 outside a pub in Sheffield. He
had previously undertaken accountancy
work for the client and had acted as an
expert witness in proceedings in the family
court between the client’s partner and
her ex-husband. The fees he charged for
acting as an expert witness had become
the subject of a dispute between himself
and the solicitors acting for the partner.
On the evening of 27 June 2015, the
former client and their partner were
standing outside a public house in
Sheffield having a drink with friends.
Singleton, who by coincidence was
at the same pub celebrating his
birthday, approached his former client.
A conversation ensued during which
Singleton said to him: “I am going to
fucking have you with what I know about
you.” Singleton pointed at the former
client’s partner and said: “And you can
fuck off and all” and added: “I am also
suing that fucking solicitor in Chesterfield.”
The partner then complained to ICAEW
about Singleton’s behaviour.
Singleton admitted using bad language
to the couple but denied that his
conduct was in breach of Section 150.1
of the Code or that it could amount to
professional misconduct. He argued
that the context in which the incident
occurred was highly relevant. He had
been instructed as a single joint expert
in litigation involving the partner and her
ex-husband. After preparing his report,
he was instructed by her solicitors to do
further work, which he agreed to do on
an hourly rate basis. More than six months
after the submission of his invoice for the
further work, her solicitors challenged his
fees, alleging they were very high, and
requested a detailed breakdown. Then
on 10 April 2015, he received a
telephone call from his former client
who alleged that the original report
was incorrect and accused Singleton of
overstating his time on the additional
invoice. Singleton was utterly incensed
by his attitude and the serious allegations
that were being made against him.
Singleton subsequently brought
proceedings in the small claims court to
recover his outstanding fees from the
solicitors. The judge found there was no
evidence at all to suggest he had inflated
his fees and, as well as allowing his claim
in full, also awarded him costs on the
grounds that the solicitors had behaved
unreasonably.
However, the tribunal was in no doubt
that Singleton’s actions on the night
in question brought discredit on the
profession and that he should have known
that they would. He had approached his
ex-client and used offensive words in a
threatening manner towards him. He also
used offensive language to the former
client’s partner. It was used in the context
of a dispute over fees. The incident took
place outside a public house and was
witnessed by the public. As Singleton
accepted in his oral evidence, he was
angry and the “red mist” had descended.
The tribunal accepted the former
client’s evidence that he had found the
incident shocking. In his statement, he
said: “I found it at first relatively amusing
but was very surprised to say the least that
[the defendant] would act in this way.”
When cross-examined about the use
of the word ‘amusing’, he replied: “It was
a joke that someone would act in that
way. I was shocked and amazed that Paul
Singleton would act in that way.”
In the tribunal’s view, while Singleton
undoubtedly considered he had a
genuine grievance against his ex-client,
this could not possibly justify or excuse his
behaviour on the night in question. The
tribunal found the complaint proved.
Order Reprimand, £1,500 fine,
£8,000 costs.
APPEAL COMMITTEE
PANEL ORDERS
Shafeen Akbar, 5 The Court Yard,
Holding Street, Rainham, Gillingham,
Kent ME8 7HE
Appeal A disciplinary committee tribunal
had found that, following a QAD visit on
7 August 2007, Akbar had confirmed
MARCH 2018 ECONOMIA

on behalf of his firm that “the practice
would be stopped” in relation to a
QAD point regarding clients’ money
being banked in the office account.
Nevertheless, on a subsequent QAD visit
on 1 December 2014, the team found that
he had not complied with the assurance
he had given. It found that he was in
breach of regulation 10 of the Clients’
Money Regulations as he was paying
client funds into the firm’s office bank
account. He also inaccurately completed
the 2010 to 2014 inclusive annual returns
for his firm, S Akbar & Co, as he stated in
them that the firm did not handle client
money when he knew that it did.
He was reprimanded, fined £2,000 and
ordered to pay a contribution of £2,500
to the investigation committee’s costs. He
appealed against the fine and the costs.
Decision He did not challenge the
tribunal’s finding that he had failed to
comply with his own assurance that he
would stop putting client money in an
office account, so breaching the Clients’
Money Regulations by comingling
client money with his own and failing
to keep them separate, and that he had
completed his annual return incorrectly
for five successive years.
The appeal panel was satisfied that
these were serious matters and felt the
sentencing order properly reflected the
seriousness of the matters proved against
him. As for costs, it accepted the principle
advanced by Akbar that costs associated
with investigations and complaints,
which were either not pursued or proved,
should not be included as part of a costs
order. But it was satisfied that the tribunal
must have taken this into consideration,
since £2,500 represented a very
significant reduction from the £10,231.50
costs schedule. Akbar’s appeal against
the sanction and costs order was
therefore dismissed.
Simon Austin, Pine House, Chandlers
Way, Southend-on-Sea, Essex SS2 5SE.
Appeal A disciplinary committee tribunal
had found that Austin had failed to
obtain and submit to ICAEW the results
of external hot file reviews within one
month of their completion. This was in
breach of a condition imposed by the
audit registration committee in respect of
eight audit reports signed between March
and October 2012 and issued by his firm.
He also inaccurately completed the 2012
ICAEW annual return for his firm when he
failed to disclose five new audit clients.
Similarly, he inaccurately completed
the firm’s 2013 return, when he failed
to disclose these five audit clients and
three new ones.
ECONOMIA MARCH 2018
Furthermore, in two instances he issued
audit reports in the name of his firm even
though the audits were not conducted in
accordance with International Standard
on Auditing (UK & Ireland) 210, Agreeing
the Terms of Audit Engagements. Also,
between February 2012 and July 2014,
he was in breach of regulation 7 of The
Money Laundering Regulations 2007
because he had failed to identify the
beneficial owners of two client companies
and to take adequate measures, on a risk
sensitive basis, to verify their identity.
The tribunal excluded him from
membership, with a recommendation
that no application for readmission
be entertained until he was able to
demonstrate full insight into and
contrition for his behaviour. It also
ordered him to pay £7,500 costs. Austin
accepted the findings but appealed
against the sentencing order.
He told the panel he did not seek to
challenge any aspect of the tribunal’s
decision in relation to misconduct. He
fully accepted his behaviour amounted
to misconduct and he apologised
wholeheartedly for it. He recognised that
he ought to have refused to act in the
circumstances in which he found himself
and that, by failing to do so, he had
brought himself and the profession
into disrepute.
Decision In reaching its decision, the
appeal panel took into consideration
the Guidance on Sanctions which states
that, for audit work of a seriously
defective nature, the starting point
is exclusion with a financial penalty of
£5,750-£11,500. It was satisfied that the
tribunal had correctly identified all
relevant aggravating and mitigating
factors and had reached a reasonable
decision. Given the seriousness of
Austin’s misconduct and the need
to uphold standards of conduct,
maintain the reputation of the
profession and protect the public,
exclusion, it concluded, was the only
applicable sanction.
The appeal panel was also satisfied
with the costs order. Although it
appreciated Austin’s concern that the
hourly rate charged by the investigation
committee was higher than he would
be able to command in the course of
his practice, the amount of £7,500 was
reasonable given the nature of the
investigation and the hearing before the
tribunal. It was also lower than the amount
actually sought by the investigation
committee. The appeals against exclusion
and costs were dismissed and Austin was
ordered to pay a contribution towards the
costs of the appeal of £1,250.
TECHNICAL: DISCIPLINARIES
INVESTIGATION COMMITTEE
CONSENT ORDERS
Stephen Quinn, 2 Craven Court, Craven
Road, Altrincham, Cheshire WA14 5DY
Complaint As supervisor of an individual’s
IVA, he failed to issue a notice of breach
in the timescale required by the terms of
the IVA. He also repeatedly failed to reply
to correspondence sent to him and his
staff in connection with the breach in
a timely manner.
Order Reprimand, £2,000 fine,
£3,893 costs.
AUDIT REGISTRATION
COMMITTEE ORDER
Prestons & Jacksons Partnership LLP,
364-368 Cranbrook Road, Ilford,
Essex IG2 6HY
Breach The firm admitted breach of
paragraph 23 of APB Ethical Standard
2 and audit regulation 3.01 in that
a connected firm made a loan to one
of its charity audit clients.
Order A £2,500 regulatory penalty.
PROBATE COMMITTEE ORDER
Duncan & Toplis Probate Services Ltd,
3 Castlegate, Grantham, Lincolnshire
NG31 6SF
Breach The firm failed to apply for affiliate
status of an individual held out as a
principal of the firm in accordance with
the requirements of regulation 2.4f of
the Probate Regulations.
Order A £500 regulatory penalty.
Hunter Healey Ltd, Abacus House,
450 Warrington Road, Culcheth,
Warrington, Cheshire WA3 5QX
Breach The firm failed to inform ICAEW
of a change in its ownership, in
accordance with regulation 2.7. It
also failed to comply with the Probate
Regulations as the firm carried out
probate work while ineligible to do so.
Order A £3,000 regulatory penalty.
Members facing disciplinary
proceedings who need help and
support can call ICAEW’s Support
Members Scheme in confidence on
0800 917 3526
CABA provides free, impartial and
strictly confidential support to all past
and present ICAEW members. Call the
24-hour helpline on +44 (0) 1788 556
366 or email enquiries@caba.org.uk
73
ICAEW
BUSINESS

SME Conference 2018

FUTURE PROOFING BUSINESS

WEDNESDAY 16 MAY Future proof your business at this year’s annual

Chartered Accountants’ Hall
Moorgate Place
London
Book today at icaew.com/sme2018
SME Conference. Dedicated to providing senior
finance professionals working for SMEs with
best-practice solutions, the tailored programme
will help you gain a competitive advantage in a
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#icaewSME
Life
this month:
Gadgets
On trend tech Discover
the latest gizmos – from
smart cars to retinal display
specs – and the future
they might herald
ECONOMIA MARCH 2018
Restaurants Savour a Life after work Andrew
unique Chinatown-style Fane on the honour of
hot pot with a bit of DIY enhancing the financial
thrown in standing of not-for-profit
organisations
75
Life Gadgets
TRANSFORMATIONAL
TECHNOLOGY TRENDS
The pace of technological
change is accelerating and,
thanks to some brilliant
science fiction writing, we
have a glimpse of what
the future might hold. But
what do today’s gadgets
and toys tell us about
the tech trends shaping
the world? Richard Cree
explores the story they tell
GADGETS: NOKIA SLEEP
PAD, PHILIPS HEADBAND
The tech story: using biometrics
to keep healthy
There has been considerable effort
put into monitoring personal health.
We all use more gadgets every day,
from fitness bands to smart watches,
that can keep an eye on fitness.
Health insurance firms are using them
to nudge people towards healthier
lifestyles. Counting steps was the
preserve of fitness freaks, but now
we all track them. Sleep is another
focus. The Nokia Sleep Pad monitors
the amount and quality of sleep. It
can also wake you up more gently.
Meanwhile, the more controversial
Philips headband does all that but
can also whisper key phrases into
your ear as you sleep. Although, as
more than one reviewer noted, this
means you can programme it to keep
waking you up and ruin your sleep by
chattering in your ear all night.
76
GADGETS: ECHO, APPLE HOMEPOD,
GOOGLE HOME SMART SPEAKER
The tech story: the power of a voice
For the time being the focus is on your voice, not
your face. Even HMRC is testing voice as a password
technology and the push to control all aspects of
home gadgetry via voice control was certainly in
evidence at this year’s Consumer Electronics Show
(CES), with the most common theme across all
categories being the race to cram Alexa, Google
Assistant or Siri compatibility into gadgets.
These systems remain largely built around a
smart speaker for now. But with three of the world’s
most influential technology giants competing to
become the standard home automation platform
by showing its approach is the most advanced and
offers the best value, it is fair to assume there will be
significant advances in this area in the years ahead.
Joining up and integrating various gadgets
around the home is the next phase. For now
these virtual assistants will have to be content
playing DJ, or controlling lights and plugs and
occasionally doing our shopping. Using the voice
as a remote control might be fun for a while, but is
it advancing humanity?
MARCH 2018 ECONOMIA
 GADGET:
INTEL VAUNT
The tech: augmented
reality

Google did some damage

to the concept of smart
glasses. And if one of the
biggest tech companies
can’t get something like
that right, who can? If Intel’s
new venture succeeds, the
answer might be another
of the world’s biggest tech
companies. Vaunt is the
latest take on smart glasses,
and being built around a
tiny Intel processor, they
look almost like normal
glasses. The scope of what
they can do has been
narrowed to a heads-up
notification display that
delivers key messages and
prompts into the near-field
vision. It incorporates some
interesting ideas, allowing
wearers to flick away or
open messages with an GADGET: APPLE IPHONE X Meanwhile, restaurants and
almost imperceptible shake The tech story: your face as retailers are going all Minority Report
of the head. Discretely a password on us, with trials of advertising tech
checking your phone may able to target messages based on
be about to get easier. recognising individual consumers.
A feature of mobile phones today is Diners at a KFC in the Chinese city of
the high quality of their cameras. And Hangzhou are able to pay for food
it is not just in our pockets. From the by smiling (potentially a tough call in
CCTV on our streets, to monitors in a KFC), while US retail giant Walmart
shops and restaurants, to our laptops has a patent to use facial recognition
and desktops and even throughout to identify – and presumably fix –
our homes (hello, smart fridge), this customer dissatisfaction.
potentially Orwellian state makes civil The technology is literally opening
liberty campaigners uncomfortable, doors, via doorbell cameras that use
but also opens up possibilities, most facial recognition as a key. As cameras
notably for facial recognition. And this spread throughout the home, expect
technology is one of the most striking more facial recognition to come to
aspects of Apple’s flagship iPhone X. market and become the standard
While it’s not that long ago the way to unlock secure gadgets.
VJERAN PAVIC/THEVERGE.COM

US tech giant paraded the TouchID

fingerprint identity sensor as the
latest word in security, now fingers
and thumbs are passé. The iPhone X
is one of several new devices to rely
on facial recognition, with Apple’s
Face ID technology setting another
benchmark in mobile security.

ECONOMIA MARCH 2018 77

Life Gadgets
GADGET: NEST
The tech story: integrated homes

In the race to be the central home

controller, who would have thought
the central heating thermostat
was going to be in pole position?
Nobody, until the arrival of the
Nest learning thermostat. Perhaps
inevitably, Nest was acquired by
Google’s parent company Alphabet,
which has used its financial muscle
to set about reinventing a bunch of
previously unsung home products,
making them smarter and able to
work together. Things such as smoke
detectors and security cameras,
motion sensors and thermostats
have been given the treatment and
more will follow. Controlling lights via
smart light bulbs, kettles and other
small appliances via smart plugs,
not to mention monitoring the food
in your fridge with special cameras
(such as the Smarter FridgeCam, for
GADGET: HUAWEI MATE 10 example) is now commonplace. The
The tech story: the intelligent phone real power lies in smart integration,
as these gadgets join up, work more
coherently and “learn” from previous
In many episodes of the Netflix series Black Mirror, patterns of behaviour to anticipate
the plot revolves around a protagonist’s relationship that you might need a boiled kettle
with mobile technology. This is no accident. With about 30 minutes after your smart
every passing week, we become more dependent alarm has woken you gently from
on smartphones. Once just for communication, they your carefully monitored sleep.
have developed into hubs that are central to our
digital lives. And the next evolution of the phone is
here, as it moves from smartphone to what Richard
Yu, CEO of Huawei Consumer Business Group,
described at this year’s CES as “the intelligent
phone” – with more native artificial intelligence
(AI) capability. Even though the best of the current
crop, such as Huawei’s Mate 10 and the iPhone X,
boast AI capabilities, they are a way off being game
changers – although the market will surely use them
to deliver more intelligent apps in the years ahead.
It won’t be long before phones will join the data
dots to anticipate user behaviour. If you like your
automated stereo system to play music when you
get home, why wouldn’t you be OK with it drawing
data from your phone, selecting the perfect track
based on data sources, such as information from
how busy your diary has been, the meetings you’ve
had and any plans you have for the evening? It may
even be able to judge your mood from the tone of
messages you have posted online or emailed.

78 MARCH 2018 ECONOMIA


GADGETS: TESLA, AUDI A8
The tech: autonomous vehicles
Some of the most enduring, and
erroneous, predictions for what the
future holds often relate to personal
transport. While some of the in-car
technology that will allow self-driving
vehicles is here, the infrastructure
(and regulatory framework) hasn’t
quite kept pace, and public
scepticism remains high.
Technology entrepreneur Elon
Musk believes Tesla is different from
traditional carmakers, seeing itself as
a tech and software company. So no
surprise it should be one of the first to
offer an autonomous driving mode.
Audi has done the same thing with its
new flagship A8.
PHOTOGRAPHY BY JOE BLOGGS
ECONOMIA MARCH 2018
Self-driving, self-parking and
indeed self-organising cars are all
within reach thanks to the Internet
of Things, which allows them to
communicate with each other. It
means each car can interact not
only with other cars to make sure
they don’t collide, but also with
intelligent infrastructure. Which gets
us on to the issue of infrastructure
investment. Cars will know where
to find the nearest parking space,
something that will be easier if cars
are allowed to organise themselves,
moving along to not leave gaps. This
supposes private car ownership will
continue, although there are already
signs it is on the wane in urban areas.
It’s possible the idea of car ownership
could become as outdated as that of
owning a horse.
Cars are already closely linked to
our mobile devices, communicating
with them and potentially controlled
by them (does summoning an
autonomous Uber from a phone
sound far-fetched?). The system will
know your diary, be aware of any
meetings and the required departure
time and the best route to take.
GADGETS: WD MY
CLOUD HOME, COZY
The tech story: the personal cloud
There’s no question that we all have
bigger digital footprints than ever
and more reason to worry about how
safe all that data, all those photos
and treasured digital memories,
might be. On top of this, many of us
want access to these files in various
locations at once and not many of us
believe that the old solution of saving
them onto a disk or USB stick is really
fit for purpose anymore.
This is where the cloud comes into
its own. And while there are some
large technology companies in this
space you might have heard about,
there is also a new trend for more
personal, home-based services.
These combine the comfort and
security of home-based, hard-drive
storage with the portability and
accessibility of the cloud. Such home
cloud systems are obviously flogged
by home computer storage firms
such as WD or Seagate, with WD’s
My Cloud Home being one example.
French start-up Cozy, meanwhile, has
launched a cloud-based personal
admin system that takes away the
frustrations of lots of different logins
for all those utility bills.
79
 The hot hot pot
There are up to

Life DIY
80 ingredients to
choose from with this
do-it-yourself dish

BREAKFAST
The Bertinet
Bakery Cafe
Bath, UK
bertinetbakery.
com
French baker
Richard Bertinet
runs courses that
will improve your
breadmaking at
Bertinet Kitchen.
Meanwhile, at the
Bertinet Bakery
Cafe, they sell the
pro’s products.
Rather brilliantly,
given the potential
preferences for
every individual,
they don’t serve
toast: they deliver
fat slices of bread
that you singe
yourself with an
on-table Dualit
toaster.

DINNER LUNCH can be abrupt and the cash-only philosophy

Blackfriars Shu Xiangge Chinatown off-putting, but the lengthy queue and high
Restaurant & Soho, London percentage of Chinese customers speak
Banquet Hall volumes about the terrific food. And now they
Newcastle, UK have recently opened a second, more salubrious,
blackfriars When it comes to DIY dining, few are as more spacious and, dare we say it, friendlier
restaurant.co.uk traditional, delightfully messy or delicious as outpost in Gerrard Street.
This converted the hot pot. No, not Lancashire’s finest: it’s the Shu Xiangge Chinatown’s hot pot comes with
13th century friary Chinese art of dunking assorted raw foodstuffs a few twists. The raw ingredients list is more
houses a cookery into a cauldron of bubbling stock. The stock a novella, with some 80 items to choose from.
school, including a cooks the raw ingredients, the raw ingredients These cover the conventional meats and cuts,
Wednesday night flavour the stock. It’s a great communal a lot of seafood and strong vegetable and tofu
casual class that experience. And the more people involved, offerings, but also goes off at quite the tangent,
covers some the more flavoursome the result. from the luxurious – Wagyu beef, anyone? – to
crowd pleasing In most cases, you can split the cauldron into the economic and eclectic with options including
subjects – pies, two, allowing for a spicy side and a more sedate beef tendon, ox tongue, brains and aorta.
pudding, Italian to option. You order your chosen morsels – sliced The other big twist is that you’re not
name but three – meats, raw prawns, bits of squid, mushrooms, restricted to two stocks, and only cooking a
in very friendly, noodles, vegetables – drop them in, let them couple of items at a time, thanks to nine-grid
relaxed group simmer, fish them out and revel in the spicy pots. For those seeking the communal eating
sessions that will steaminess of it all. experience, it’s a fine innovation. One word of
improve your skills Recently a few places have attempted to warning: the spicy beef fat oil broth is seriously
WORDS BY NEIL DAVEY

and confidence, rebrand hot pot as a slick, modern thing – Shuang
and send you Shuang for example – but this is one style of
home with enough dining where there’s no school like the old
food for supper. school and one of the best examples has long
been Shu Xiangge in New Oxford Street. Service
hot. For those who like their food with an
endorphin rush though, it’s great.
Our advice? Go, take as many colleagues as
you can muster – but leave the ties and scarves
in the office. ○

80 MARCH 2018 ECONOMIA

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ECONOMIA MARCH 2018 81

LIFE AFTER WORK
I
’ve always been excited by the
idea of enhancing an organi-
sation,” says Andrew Fane.
“Whether it’s a commercial operation,
or a charity helping sick children or
preserving historic buildings, you
should always be striving to make it
more effective. It’s vital to underpin
any organisation with sound financial
practice to make it work properly.”
Fane was on the board of Great
Ormond Street Hospital for 20 years,
was chair of trustees at English Herit-
age for a decade, and is now doing
the same job at Chiswick House and
Gardens, Stowe House and the Suffolk
Preservation Society. His dedication
recently earned him an OBE, but
he calls simply working with them a
“greater honour”.
“They’re all wonderful organisa-
tions and it’s a privilege to be asked
to be involved with them,” he says. “I
like being able to put back, to use what
I know to help their present work,
but also make them secure for future
generations.”
Andrew Fane has turned his multiple trusteeships of non-profit organisations into
a calling. He tells Peter Taylor-Whiffen why he’s honoured to fight for good causes
Cause and effect
82
Fane recognised the importance
of a professional skillset early in his
career. “I read law at Emmanuel and
articled at [London firm] Robson
Rhodes because I knew both would
prove invaluable in my understand-
ing of business.” In the late 1960s he
joined “what you’d now call a private
equity firm”, Whitburgh Investments.
“I was soon executive director and
was keen to help businesses grow.”
When he left Whitburgh in 1992 he
was asked to join the board at Great
Ormond Street. “It was wonderful,” he
says. “Some businesses thought that as
a charity, we might be a bit soft – but
where we needed to we took on law
firms, battled with contractors, chal-
lenged legacies. We were determined
to do the best for the people we were
really working for – the young patients
in the hospital. Imagine the pleasure
you get from seeing patients treated
in a brand new modern building your
work has helped to create.”
His roles as a councillor in Kensing-
ton and Chelsea attracted the attention
of then English Heritage chairman Sir
Jocelyn Stevens. “I was plonked into
their Historic Buildings Council and
the London Committee, where I over-
saw some amazing Millennium works
including St Pancras Station,” Fane
says. “There were all these experts,
and in the middle, chairing, was me,
an accountant.” He is now embracing
other heritage projects at Stowe House
in Buckingham and London’s Chiswick
House and Gardens. “I have a passion
for great buildings. We have a duty to
preserve them.”
Fane, who lives in Woodbridge,
Suffolk, with his wife Clare (Marx,
president of the Royal College of
Surgeons), was “completely taken by
surprise” by his OBE. “I’ve been lucky
to have been asked to take on certain
roles, and learned from and worked
with some inspirational people.
“That recognition says to me I must
be doing something right, and inspires
me to carry on. I’m 68 now but these
roles aren’t a sinecure – there are jobs
to be done.” ○
PHOTOGRAPHY BY RICHARD ANSETT
MARCH 2018 ECONOMIA
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