SWINGS AND ROUNDABOUTS

December 12, 2016 JAK No comments exist

The weakening pound means your Brazil nuts are going to cost more this Christmas but in international currency terms you will be paying less for your Stilton. As a UK resident, perhaps this saving doesn’t add much festive cheer – but it would if you were a Welsh steelworker.

 

At the end of last week, Tata, the Indian steel giant, said it was reviewing the closure of its Port Talbot works, partly on the back of a weaker pound. When its closure was announced in March, it pretty much heralded the end of British steel: now it seems 4,000 workers will have their jobs guaranteed for five years, backed by Tata’s further £1 billion investment in Port Talbot.

 

There’s a sting in the tail: they have to agree to reduce pensions. The £15 billion pension scheme for 130,000 people, of whom only 10,000 are still working, was the straw that broke Tata’s back originally and it has been a major deterrent to fresh investment and new buyers.

 

This is not the first time a big company’s pension commitments have forced closure. Sir Philip Greene’s inability – resistance – to pay pensions at BHS turned him from the darling of the retail trade to the unacceptable face of capitalism this year.

 

Have you considered what your future pension commitments are and whether or not you can afford them? Forecast5 is the fast and accurate way to develop “what if?” scenarios for your business. It will show you whether, given actuarial assessments, you will be able to afford to pay your pension commitments and offers you a quick and easy method of calculating various scenarios to help you plan.

And as an integrated forecasting suite, you will be able to see what your balance sheet looks like in the future, as well as your profit and loss account, cashflow and funds flow statements.

 

Download a free trial of Forecast5’s  forecasting software here.

 

If your pension scheme is primarily in fixed interest investment, you almost certainly won’t be able to meet its long-term commitments. Properly invested, its returns look much better post the Brexit vote. Last week was the FTSE’s best week since July with a 22.66 jump and, at 6,954.21 it’s about to breach the psychological 7,000 mark. This is largely due to minimal interest rates but also to investors’ confidence in the UK economy, given a falling pound.

 

A weaker pound appears to be the main reason Tata has re-joined the game in the UK: exports are suddenly looking brighter.

 

Are you the FD for a manufacturer who might also be benefitting? Would you gain kudos if you could present this in a digestible form to your board? Forecast5 has the tools to help you do this. We recently integrated our forecasting software with Sage 50, which means you can transfer data directly from your accounting program to our forecasting software, Forecast5, making forecasting even easier. Integration with Sage 300 (ex Accupac), Sage 200, Xero and others is in process.

 

Aren’t you glad that you are not at the helm of an Italian company, given the drubbing voters gave Matteo Renzi’s Constitutional reforms? Whatever we now blame Tony Blair for, at least he didn’t take us into the Euro. The Daily Telegraph quotes the Centre for Economics and Business Research (CEBR), a leading economics consultancy, saying that following the vote it now estimates the chances of Italy staying in the Euro through the next five years have fallen below 30 per cent.

 

The CEBR said that bitter three-month campaign had demonstrated that Italian voters would not tolerate indefinitely the chronic unemployment, stagnant wages and Brussels-imposed austerity that now come with euro membership.

 

That’s another reason to celebrate the Brexit vote and be thankful for a currency that marches in step with our national economy. If, however, you do own European-based companies, now might be a good time to do a bit of business forecasting about the implications of Marine Le Pen winning the presidency in France and Italy falling out of the EU…

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