2017 predictions from the ICAS Executive Team
What does 2017 hold for the finance and accountancy profession? As the new year dawns, members of the ICAS Executive Team share their predictions for the future.
Atholl Duncan, Executive Director, UK and Global
Making predictions was an unsuccessful activity in 2016. Did anyone foresee the hat trick of Trump, Brexit and Hibs winning the cup? 2017 may be no easier to call.
My first prediction is that Brexit will become softer and greyer as summer turns to autumn. That will lead to the resignation or sacking of at least one of the three leading Brexiteers in the Cabinet and a festering sore continuing to be painful for the Conservative Party.
UK business will plough on regardless with gentle growth despite the lack of political clarity or direction.
The lens through which Brexit is viewed will be changed substantially by further turmoil and anti-European sentiment expressed through the internal politics of other key Euro nations.
Perhaps by next Christmas, the UK’s position will look more like first mover advantage than political Armageddon.
Predicting Trump’s New Year is not for the faint-hearted. A good bet is for the US economy to sprint ahead.
Much ink will be spilt over the prospects of global trade wars stirred up by Trump’s Twitter diplomacy. The leaders of the world’s other big economies will strike back, reminding America that trade is a two-way thing!
Some of Trump’s political appointments will turn out to be remarkably capable and surprisingly competent. However, the American media will fill their space with ongoing controversies over conflicts between “the Donald’s” business and political lives.
2017 will be the year when the true impact of technology, robotics and artificial intelligence become apparent beyond the world of geeks and visionaries. Dinner parties, wine bars and social media will awake to the impact these seismic shifts will have on all our lives.
Unfortunately, we will also be further scared by the risk of cybersecurity and the terror of the hacker. Several big brands will see value destroyed by headline hitting hacks in the next 12 months.
In Scotland, times will be difficult for the SNP Government after a decade of power as further focus falls on standards in education, health and the economy as talk of ‘IndyRef2’ fades.
From April, the Scottish Government's use of new devolved tax powers will result in some Scottish residents paying more income tax than their colleagues elsewhere in the UK. The Conservatives will attempt to bring these two issues together by asking why Scots should pay more for poorer public services?
Labour, Lib Dems and the Greens will demand further tax rises for the better off to counter austerity. Business leaders will point out the dangers of making Scotland the highest taxed part of Britain.
Three bets with longer odds worth considering include a new monarch in the UK; the British Lions to beat the All Blacks; and Trump to give up Twitter.
All of these predictions carry a grave health warning. Don’t rush down to Ladbrokes on my behalf. Gamble responsibly.
David Wood, Executive Director, Technical Policy
2017 is lining up to be an interesting year.
I suspect the Brexit process will be slow and hugely frustrating, with possible delays from parliamentary involvement and little meaningful negotiation with our EU partners until after the German elections.
There may be an increasing realisation over 2017 and early 2018 that EU negotiations can’t be completed within two years and that there will be a need to make transitional arrangements for a post-Brexit period whilst outstanding matters continue to be negotiated.
There has been much speculation about President Trump and whether he will pursue some of the policies he has been espousing. Few mentions of accounting and auditing so far but his appointments to the Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) will have a strong influence on whether the US moves towards international standards or whether it remains sceptical of anything “not invented here”.
The report 'Auditor Skills in a Changing Business World' from the ICAS/FRC Steering Committee looks ahead to the likely changes in auditing – from the technological capability to audit virtually every transaction and the likely demands from users for assurance over new forms of reporting. Auditors are going to need more business acumen, skills in technology and data interrogation, and better soft skills for “reading the client” as well as the ability to draw in multi-disciplinary experts.
The appointments of Richard Howitt as CEO to the International Integrated Reporting Council (IIRC) and Paul Druckman to the FRC’s Corporate Reporting Council suggest that there could be a renewed impetus for integrated reporting in 2017. It will be interesting to see how this encourages a broader perspective on the reporting of corporate performance and, more generally, on corporate strategy and operations. ICAS is undertaking thought leadership and research projects in 2017 on how companies can best report on their performance and their capacity for future value creation.
HMRC is supposed to be deciding in January on how to take forward its Making Tax Digital proposals – or Making Accounting Digital (“MAD”) as it is becoming known. Hopefully HMRC will heed the warnings of how burdensome the proposals will be for the majority of businesses over the planned implementation timeframe. Certainly we are ready to help shape some more sensible proposals over a more feasible timeframe.
And there are some fundamental issues bubbling along almost out of sight. UK Infrastructure feels like it’s straining after years of underinvestment, and there is a growing (and costly to support) ageing population. With continued focus on restraining Government borrowing and the extra civil servants to see us through and beyond Brexit, this is all likely to push us towards a higher tax environment for businesses and individuals alike. Will 2017 be the year when the Government starts to broach this difficult subject with the electorate?
Mark Allison, Executive Director, Education
The Apprenticeship levy will become a reality on 1 April 2017 for all organisations in the UK with payroll totaling over £3 million.
In theory, those organisations with a progressive approach to recruiting and developing young people should come out of this neutral by reclaiming their costs of investing in their people.
In the accountancy sector generally, and specifically in Scotland, there may be a number of obstacles put in the way of ensuring efficiency and fairness of the scheme. ICAS are in the thick of the discussions representing member firms and trying to make sure that any accountancy apprenticeship is attractive and not a bureaucratic burden.
The question of what skills are needed for tomorrow’s auditor will continue to be debated and the drive to automation of functions previously carried out by accountants and auditors will not diminish.
I am reasonably confident, however, that the judgements and values that continue to underpin the CA qualification will evolve with the market and that the demand for professionals with the CA designation will still be strong in 12 months' time.
Michelle Mullen, Executive Director, Professional Standards
I’ve decided that change is here to stay.
After a busy 2016, there are plenty of challenges ahead for our firms and members.
Anti-money laundering (AML) will be on every regulator's radar in 2017. The EU 4th Anti-Money Laundering Directive must be transposed into law by 26 June 2017, and preparations will intensify for the UK’s visit by the Financial Action Task Force in early 2018.
All firms and businesses should take the opportunity to review and improve their approach to AML. Don’t underestimate its importance. At a time when the current threat level for international terrorism in the UK is severe, the UK’s response to money laundering and terrorist financing is a key component of the strategy to protect the safety of citizens and the integrity of the UK financial system.
Making Tax Digital or MAD? Need I say any more?
More generally, the UK will start to give more detailed thought to the regulatory implications of Brexit.
Audit, AML, data protection, the mutual recognition of qualifications and the provision of services are just a few of the key regulatory areas that have been shaped by Europe and all are issues that affect practising firms and their clients.
Should the UK accept the status quo or embrace the opportunity for change? Yes and no.
Given the complexity of the Brexit process, perhaps the most straightforward approach will be to plan for the transposition of most regulations into UK law, and identify a few key areas where immediate change is necessary. The challenge will be deciding which is which.