Tell us a bit about your main focus for the year ahead
I’ve been in the profession for 30 years and I’m really proud of being in it. The skills we bring to bear are a combination of finance, law and business common sense. And it’s an inevitable part of any business cycle – regardless of the economic climate – that some business will succeed and others will fail. So, it’s a very necessary part of the business world. It’s a question of us applying the best possible combination of skills to create a better outcome than there would be without our involvement.
Testament to this is that tens of thousands of jobs get saved through the work of the profession – I’m thinking particularly of the high profile retail failures such as HMV and Jessops. Parts of the business were sold, jobs were saved, it was good news.
You can often look at organisations and see where a rapid expansion in the good times has led to a portfolio of outlets that have variable performances. When the economic tide turns you have to find a way of taking out underperforming outlets and keeping those that are performing well.
How much of a problem are zombie companies?
It’s a real phenomenon the zombie businesses. They are in that position largely because interest rates are so low. So they may be limping along, able to service their debt because of those low interest rates, whereas in a more normal environment you’d expect to see the capital that’s invested in those businesses being recycled into more productive businesses. I’m not expecting in my presidential year to deal with a huge wall of zombie companies, but I think we will as interest rates start to inch up. We will see the pressure on those business come into much starker relief.
Is negotiating with landlords difficult?
You do wonder why landlords are still holding out for onerous terms. Unless they think they have such a prime location that they’ll definitely get someone in there, I would have thought continuity would be better. They might also be avoiding setting a precedent. I’ve seen it quite a lot just on my little local high street.
The impact of the internet has also damaged the high street. The acceleration of consumer confidence of buying things over the internet has been incredible. Maybe even three or four years ago there was a hesitation and the online retailers have really been so good at perfecting their service delivery.
Will you do a lot of campaigning around pre-packs?
Definitely. Under Lee Manning’s previous presidental stewardship we were very much on the front foot around pre-packs, and we will continue to be so. It is a very necessary part of the weaponry that’s available for restructuring businesses. I think its reputation has become somewhat tarnished because often you see businesses being sold back to the same owners and directors.
But frankly, even if you didn’t do that via a pre-pack and you marketed it, and you took time, and so forth you’d probably still end up getting the best value from the directors for a lot of these businesses. This is particularly the owner-managed businesses, because they have the intellectual property, the reputational risk, the loyalty of the staff. We’re going to continue to push on this a being a valuable part of the process.
Should it be a last resort though?
It should be used with caution I think – it’s difficult to say it should be a last resort because there isn’t always a better way of doing it. But it needs to be transparent. There have been incidences where it has been less than transparent and it hasn’t always helped in terms of reputation. But there is another review under way that we will be very closely involved with.
What can government do to in terms of regulation to help?
I never want to advocate more regulations. I think we are a highly regulated profession already, so it’s more about tweaking the existing control framework rather than imposing a whole new raft of legislation.
I think transparency is very important and it helps more than just understanding pre-packs. It helps address the reputational element that we’ve already talked about, plus helping people to understand about the positive affects that insolvency practitioners have and business recovery professionals.
You’ve been a big campaigner for diversity across the accountancy profession. Is this something you want to focus on in your presidency at R3 too?
Our membership is only 20% female, even though over 40% of the folk who are successful in professional exams are women. I think there is a job to do to encourage more people to join R3. But the good thing about R3 is that, unlike other businesses, the senior ranks actually become more diverse.
It isn’t something I want to force on the profession, but I want to focus on it in terms of how we encourage the next generation through into this profession – how we make this a profession of choice and not just of accident. Because many of us ended up in this area by accident. Helping the next generation through should help to bring diversity of both ethnicity and gender.
It’s an intriguing phenomenon and I think there are many answers. The professions need to work much harder at encouraging newly qualified women to stay in the profession and to stick their hands up and get involved with stuff. That’s a more natural environment for men I think.