What are the main challenges facing company directors?
BLM partnered with the Institute of Directors (IoD), who arranged for a panel of chartered directors to discuss the key challenges facing leaders in business and industry. The findings are published in this feature.
What are the main challenges facing Directors in the room?
David Doughty: “From my own business, and from my clients’ perspective, it is that lack of confidence and insecurity that delays buying. It seems to be worse if you are older. There seem to be a lot more reasons for not making a buying decision…Christmas, New Year, Skiing, School Holidays.
“People tend to look for excuses. It is the entrepreneurs who aren’t looking for excuses though, they are looking for reasons to take opportunities.”
How is investor confidence holding up?
Nick Sturge: “I have a very local perspective in that respect, both in terms of a sector view and from a geographical perspective. Within this context, we have seen a significant step up in terms of the level of investor activity and that is critical in the initial stages.
“So, we are seeing more activity which is my closest estimation to confidence. I do think that, having spent time out of Bristol and the South West, there is a difference in the sectors and the markets here in this part of world compared to other places like London and Manchester – who have a larger volume of activity, so some of these businesses are formed on a false premise.
“There is a lot of hype around start-ups and some of them don’t get anywhere. What we see is perhaps fewer start-ups but the ones who do start up are more likely to stay and be solid.
“It is easy to think that everything has been invented but there are still a lot of things that can be done and are being done. Investors, in our experience, are backing those things.”
What challenges are IOD members facing more broadly?
Simon Face: “The range of challenges is almost unlimited, but one people are worried about is around the future of the workforce and where future labour is going to come from – particularly post-Brexit. So, while we have a little time to work things through, it is not a huge amount of time – about 18 months. Things are going to change, particularly in manufacturing and food.”
Mark Saxton: “I don’t think we have 18 months, I think the issue is right now. Certainly, in the health sector – it is here now. We celebrated diversity day – 49 different nationalities in a small district general hospital – that is quite staggering for Yeovil.
“There are a couple of things I would also like to say. I think this pay vs Retail Price Index (RPI) is just a train coming down the track. That is a big issue I think certainly in the health sector with a 1% cap.
“Generally, too, I worry about the global trend of disengagement, the Trump type of reaction. Two major political parties in France were eliminated and it is a new model in France. I think the ‘haves vs the have-nots’ is also a major issue facing us locally and globally.”
What would you say are the main global risks facing directors?
David Doughty: “Globalisation is having an affect but I am not sure it is having the affect that people think it is. I think the trade markets are as healthy as they ever have been. I was a director of a manufacturing business which exported most of what it produced and we never discussed tariffs or trade agreements. If there was business there, we went after it.”
Are people now talking about tariffs?
David Doughty: “Politicians and the media talk about it but the reality for most businesses is that it is never discussed. They sell around the world and deal with the agreements afterwards, with what you must pay in tax or not.”
Nick Sturge: “Some of these things (such as trade tariffs) have been business as usual for a long time but suddenly they become issues, perhaps unnecessarily.
“Regarding trade with Europe, some companies are fearful of that what the new climate may mean for them and the challenge will be for early stage companies to bring expertise on board, which they don’t have.”
Simon Face:“I think whatever happens, the UK is going to become a much higher cost economy. We are already seeing inflation coming through, food prices and in automotive goods as well. If we start seeing more tariffs and import duties, which is the likely scenario then this will have an impact.
“Businesses will have to look to where they can make money and add value – it is around innovation, it is the knowledge economy – that is where the future of the UK is going to be. We will probably end up looking more like Switzerland or Norway.”
Could we end up being like a Singapore without the sun?
David Doughty: “We are seeing signs of this already I think. If you look at the housing market, the house prices in London and the South East – that smacks of a high cost economy. Whether the city will survive or be able to help sustain that is another question.
“We are still one of the most attractive countries for inward investment though, mostly because it is very easy to set up a business. That is the primary factor, the taxation would be an added sweetener and there is no reason why we couldn’t have a corporation tax regime, that is more attractive than the EU.”
Is the UK an easy country todis-invest from?
Mark Saxton: “It is a lot easier to close offices here then it is in Sweden or France, for example.
“Anecdotally we are hearing of more global businesses investing in Ireland for example, to make sure they still have access to the EU market as well as having an international, English-speaking base.
“What we are also hearing is that people working in the city can more cheaply buy a house in Ireland and fly into an airport every week than work in London and fly home at the weekend.
“That is another example of the world becoming more global, whether you like it or not.”
How much of a threat would Jeremy Corbyn as Prime Minister be?
Simon Face: “I don’t think most business people would see a return to the nationalisation of utilities as necessarily a good thing. It might sound attractive as an individual, if you’re voting for what appears to be a free service but at the end of the day it still must be paid for and accounted for.
“The reason why most water companies were privatised in the 80s and 90s was because they needed huge investment – they were running 100-year-old infrastructure which needed replacing.”
Nick Sturge: “Some of his policies will of course be popular but staggeringly expensive and that logic has not been articulated.”
David Doughty: “He also demonstrates a lack of understanding of the way that pensions are funded because he is talking about taxing investors as if they are private individuals but they are mostly pension funds.”
Nick Sturge: “There was one thing in the Labour manifesto that the IOD would be nationally supportive of, subject to detail, which is the idea of more worker representation at board level.
“It would be interesting to get some thoughts on that. The IOD is supportive of better engagement at board level with the workforce. There is much to be discussed because if you elect an employee to sit on the board, then they need the skills to be a company director. It is an easy sound bite for politicians but in practice it is difficult.”