Politicians’ ignorance can have a negative impact on the global economy

beware the influence of politicians on the global economyAs 2018 draws to a close it makes sense to look at macro-economic trends that might inform our view of the future.

Economies tend to move in cycles from positive to negative and this is true for both national and global economies.

However, while it is true that the cycles rarely match simultaneously in different parts of the world, clearly a downturn in one region can have knock-on effects in another, as was the case in the financial crisis of 2008.

For some time now, various bodies, such as the IMF, have been predicting that another major global recession is looming. Some are even predicting that the next crash will be worse than 2008.

This is partly because the accepted wisdom is that the cycle tends to be over a 10-year period, but it is also because there appear to be headwinds building up.

A snapshot of the current state of global confidence, the global ECM (Economic Confidence Model) from July this year suggests that the USA may be moving into a serious high in 2020 regarding liquid assets (non-fixed), while the rest of the world is heading in the opposite direction. The Dow Jones has been heading ever upwards, while the UK, European and Chinese markets seem to have peaked and are heading downwards. This also applies to currency values.

According to Richard Partington, a Guardian economics correspondent, the potential headwinds for 2019 include a plateau in global growth along with slower growth predicted for the US and China, plus both public and private debt around the world being at a record high. Added to these, he says, are the risks from Brexit and from the US Fed hiking interest rates.

This is where the politicians come in

Despite the 2008 crash, and the subsequent measures taken by Governments and Central Banks such as using quantitative easing and keeping interest rates low to stimulate economic activity and requiring banks hold more capital to avoid a repeat collapse, both Governments, and investors, still have faith in Government debt in the form of bonds and property on the basis that economies are stable and will continue to grow.

Both are deemed “safe” and property is used as collateral for more debt. Nevertheless, some economists argue that the restrictions now placed on foreign investment in property have actually had the effect of devaluing it and also damaging consumer confidence.

So, by this logic, policies such as those of US President Donald Trump’s “Make America Great Again”, that encourage investment to return to the US, and his threats of trade sanctions against those economies that are perceived as competition to the US economy are unlikely to help to stabilise the global economic situation and instead would build up the recessionary pressures in the rest of the world.

The UK Government, too, has been taking steps to deter foreign investment in property. Then there is the rise of various so-called “populist” movements across the world, such as in Italy, Turkey, Hungary and elsewhere, which again focus on national interest above all. Another danger, according to Partington, is victories for populist parties in the forthcoming EU parliamentary elections in May 2019. The mood would appear to be one of increasing restrictions on global trade.

Inevitably, in the event of another crash on the scale of 2008, or worse, such policies will come back to bite us all, not just the politicians. But then we did vote for them!

Productivity, working hours and health – time for a new approach?

happiness and workers' productivityProductivity, and how to improve it, is a perennial concern for the UK’s SME managers.

The country’s woeful productivity when compared with other countries has long been an issue for businesses, albeit it improved in the first six months of this year according to ONS (Office for National Statistics) figures.

Productivity is traditionally measured by the amount of work produced per worker, per working hour, but new thinking suggests that we are measuring it all wrongly.

In an article in Businessleader.co.uk entitled Are we measuring productivity all wrong the economics and productivity expert at UWE, Professor Don Webber is quoted as arguing that productivity is measured by dividing gross value added (GVA) by the number of hours of work but that until the financial crash of 2008 GVA had been disproportionately boosted by the financial services sector.

There are three components to increasing productivity, he says. They are the ability to push down costs, push up prices and sell more units.

But he says the calculation is far more complex in a consumer economy like the UK, where austerity has had an impact on the ability to buy goods and services, and not enough attention is paid to such elements as investment in more efficient systems, tools and working conditions.

Indeed, I would argue that national productivity measurement based on macro data masks the huge productivity gains made by many firms and especially those who have invested in automation, robotics, AI and new machinery. Consider the comparison of two measures of productivity and how they might show significant improvement; the first is sales by square feet in a Lidl or Aldi, both shops that stock the shop floor with pallets of goods; and the second is car manufacturers who might measure sales per worker where their factories are automated. It can be seen how the gig economy masks these productivity gain figures.

The Businessleader article also mentions some HSBC research, which found that workplace culture is a key factor to increasing productivity.

It found that businesses that offer employees the opportunity to work flexibly are more productive and that workers place flexibility ahead of financial incentives when asked about what motivates them the most.

Innovative solutions to improving productivity

In November, Shadow Chancellor John McDonnell suggested that businesses that operated a four-day week without cutting pay could see improvements in staff morale, health and revenue. It may seem counter-intuitive but there is evidence from a number of bosses whose businesses have tried it that they are reaping rewards. The economist, Lord Skidelsky, has been asked to investigate the issue further.

The Health and Safety Executive (HSE) recently announced that, for the first time, work-related stress, anxiety and depression account for over half of all working days lost due to ill health in Great Britain. In total, 15.4m working days were lost in 2017-18 as a result, up from 12.5m the previous year.

The issue of businesses paying attention to their employees’ mental wellbeing as well as their physical health has consequently attained a higher profile. A growing number of major employers, including the bosses of Royal Mail, WH Smith, Thames Water and Ford of Britain have called on the Government to give mental health the same status as physical health in HSE legislation.

Clearly, it makes sense for businesses to review their policies and practices on working hours, mental and physical health support and training, where there are now so many options for using AI and smart technology to improve working practices and where it is becoming clearer that a happy, healthy and motivated workforce is a key to improved productivity.

No sign of improvement in shoddy banking services to SME customers

the wild west of shoddy banking servicesIt has been a year of IT meltdowns, continued closures of small branches and ATMs throughout 2018 with the main High Street banks seemingly still unwilling to listen to their SME customers.

At the end of last month the Government’s Treasury Select Committee finally launched an inquiry into the “astonishing” number of IT failures in the financial services sector.

This came shortly after the BSB (Banking Standards Board) had admitted to MPs that there had been little improvement in the UK’s poor banking culture since a parliamentary commission condemned poor standards.

However, whether the select committee will also look at the other frequent complaints about the closure of small branches and ATMS, especially in rural areas, remains to be seen.

Bank IT meltdowns

The most high profile meltdown of the year was suffered by TSB in April, when millions of customers, including SMEs were locked out of its online service and banking app following the failure of its attempt to migrate customers to a new computer system. Service was restored to private customers relatively quickly but I am hearing from a few SMEs that their problems are still not completely resolved.

By September, customers of Barclays, RBS, NatWest and Ulster Bank had also been affected by their banks’ IT issues and in November it was the turn of HSBC’s mobile apps for the fourth time in a month.

The FCA (Financial Conduct Authority) and the Bank of England’s Prudential Regulation Authority also published a discussion paper which suggested that they were considering policies that force banks to improve operational resilience. Among the suggestions were that there should be a maximum outage time of two days and that they should have back-up systems in place.

Banks were given until October 5 to respond. So far there has been a deafening silence on the results.

Small branch and ATM closures – more shoddy banking services

Perhaps more concerning is the numbers of small branches and ATM points being closed.

According to research by Which? a total of 757 branches have been closed or scheduled for closure in 2018 and January 2019.

Which? has been tracking bank branch closures since 2015. At least 2,961 branches have been shut down in the past four years, at a rate of 60-a-month.

The excuse given by the banks is that because more people are now using mobile or online banking it is uneconomic to maintain small branches. According to a report published by UK Finance, the trade body that represents banks, 71% of adults used online banking in 2017, representing 38 million people.

At the same time an estimated 250 free-to-use cash machines are disappearing a month as operators shut unprofitable ones, according to the network co-ordinator Link.

But all these cost saving measures by the banks seem to take no account of the difficulties faced by many SMEs and private customers in small towns and villages across the UK where broadband and mobile phone signals are far from reliable.

The situation has prompted the FSB (Federation of Small Businesses) chairman Mike Cherry to say: “We want to see banks properly justify reasons for closure.  Bank branches are vital to a lot of small business owners.”

And the final irony – a survey carried out by TSB in November found that 68% of small businesses believe their banking needs are being overlooked in favour of larger, more profitable companies.

The survey report said: “Banks must commit to providing face to face local business support in the real economy, not just metro economies, thereby ensuring that not just those that are digitally savvy or based in big cities are able to get the advice and services that can help grow their businesses.”

Automatic closure of accounts

While less reported in the press we are still coming across SME clients whose accounts have been automatically closed, many after years of being a customer of the bank without a record of breaching covenants, exceeding overdrafts or bouncing cheques. The banks try to hide behind claims of concern about money laundering where in practice it would seem that computer driven assessments automate the closures. And in every case we’ve heard of not even a phone call had been received.

So much for banks wanting to have a relationship with their SME customers or being customer orientated. You couldn’t make it up!

Is there a link between unethical personal behaviour and corporate behaviour?

infidelity and corporate behaviourCan and should investors expect the corporate behaviour of CEOs to be ethical if their behaviour in private is less so?

Releasing the names of those people who had registered their interest in having an extra marital affair following a hack of the Ashley Madison data base caused much vicarious interest. While it no doubt embarrassed those who were exposed and possibly excited some divorce lawyers, it raised the question as to whether someone who deceives their marital partner is more likely to deceive their business or their business partners and shareholders.

It prompted research in the USA by authors John Griffin, Samuel Kruger and Gonzalo Maturana, who then published their work Do personal ethics influence Corporate ethics?

They had cross matched some of the names revealed with corporate information available from Lexis Nexis and other sources, and against the US’ Financial Industry Regulatory Authority’s BrokerCheck and the results revealed a correlation between those financial advisers exposed for marital infidelity and those with a record of serious misconduct revealing that they were twice as likely to have committed an offence.

A similar correlation was revealed when they checked revealed names for chief executives and chief financial officers.

Is ethical behaviour the same whatever the context?

The authors argued that there is plenty of research that shows that the behaviour of CEOs influences others in a company: “other employees perform better if they think the top management is trustworthy and ethical”.

I recall being asked by owners of a nightclub in Greek Street to investigate its lack of profits with view to improving them. I quickly discovered that significant amounts of cash were disappearing from the tills. It turned out that the owners were popping in to take cash, the managers knowing this were also taking cash and so were the staff. Everyone was at it and it was clear that the business was morally and culturally bankrupt with no one interested in it being successful. Theft had become part of the culture where knowledge that others were stealing made it OK. I closed it down and sold the premises on the grounds that a cultural transformation was required based on changing all staff and the behaviour of the owners.

There is a debate to be had about whether some behaviour is acceptable in the corporate context that would not be acceptable in private or social life.

Businesses are largely results and profit-driven and these days investors expect results in a much shorter time than they would have in the past. While outright cheating, deception or breaking the law would not be condoned, aggressive pursuit of corporate goals is arguably a much greyer area.

According to the website ethical systems.org “Research suggests that people’s moral compasses are malleable and that various factors influence them. People do differ in their levels of personal integrity, but everyone is susceptible to environmental influences.”

It argues that the behaviour of leaders can therefore have a critical influence on the behaviour of those they are leading. My example of the nightclub supports this.

It makes sense, therefore, that leaders should demonstrate a balance between a focus on outcomes and goals and the means by which they are achieved and that it is important to also focus on people’s efforts to improve and to reward them.

There is also the argument that if a business is receiving bad publicity for the way in which it treats customers and addresses their customer complaints such that it is perceived to be entirely profit-driven and paying scant attention to the quality of service then ultimately the business will be damaged.

So logically, if such behaviour is damaging the bottom line, then the return to investors will also be damaged, and it therefore makes sense for investors to pay attention to the ethics of CEOs both in their private and their corporate behaviour.

December Sector focus – are residential care homes viable businesses?

care homes resident and carerThere have been question marks over the financial viability and sustainability of private residential care homes for the elderly since the collapse of Southern Cross in 2011.

At the time it was the largest provider of private residential care homes in the UK and for the first ten years of its existence had been deemed a financial success.

The company was set up in 1996 by a businessman named John Moreton following Government changes to the care home system, resulting in financial cutbacks alongside the imposition of higher standards, which pushed many small independent, essentially family-run, providers out of business.

By 2002 Southern Cross had 140 sites and attracted venture capital interest from WestLB, and two years later, from US private equity firm Blackstone, which bought the business for £162 million.

It continued with acquisitions until the 2008 Financial Crisis, whereupon it became unable to pay a debt deadline of £43 million, its share values plummeted and it began selling assets to pay its debts.

It is a familiar story, but it does not seem to have diminished the appetite of private equity to invest in the care home sector.

However, there have long been concerns about its viability, the most recent in November 2018 being a warning from the regulator the CQC (Care Quality Commission) that Allied Healthcare, the UK’s current largest provider, owned by German private equity investor Aurelius, could cease operating within weeks, again because of loan repayments falling due.

Sustainability problems for the private residential care homes sector

Care homes’ income comes from a combination of self-supporting residents who pay a average of £830 per week for their accommodation and care and from local authority-funded residents, whose maximum payments are considerably below the required cost.

At the moment there are over 400,000 care home beds in England but a lack of public sector care home provision has led to warnings that there will be a shortfall of some 28,000 beds by 2025, according to AMA Research published in its The Care Homes Construction Report, which found that the majority of developers were concentrating on building in areas with a high concentration of potential self-funded residents.

In November 2017 the CMA (Competition and Markets Authority) warned that the sector was on the verge of collapse largely because there was a £1 billion shortfall in costs due to local authorities being unable to meet the actual costs of care provision.

Its analysis of the sector’s financial viability found that the industry was at a “tipping point” and that it had come across instances where local authority-focused care home providers were exiting the local authority segment and that some providers had handed back care home contracts to local authorities.

It concluded that providers have generated most of their profits, in aggregate and on a per resident basis, from non-local authority funded residents, where self-funded residents have made a higher contribution towards fixed costs and common costs such as overheads and that providers have been loss-making in economic terms, i.e. returns below the cost of capital, on local authority funded residents.

It also concluded that many providers were carrying unsustainable levels of debt.

In February 2018 the CQC introduced a new financial viability test on new care providers. It should be remembered that the CQC is responsible for vetting standards of provision and quality of care in care homes and rating them accordingly. Where improvements are required this will mean additional expense for the owners.

Given that investors in private equity and venture capital require a significant return on their money, and in recent times have been less than patient about waiting to get it, all this would suggest that the current model for financing care homes is not viable and significant changes are needed to the model of care provision for the elderly, both local authority-funded and self-funded.

December key indicator – the UK economy at the end of 2018

storm clouds over UK economyAs the end of the year approaches, this month’s Key Indicator looks at the state of the UK economy.

Assessing an economy is not only about facts and figures, it is also about perspectives over time and the effects of business sentiment, and there is little doubt that the country has been facing an uncertain future for the past two years.

Since the Financial Crisis of 2008, the UK economy dropped from being one of the fastest growing of the G7 economies (UK, Canada, France, Germany, Italy, Japan and the US) to being the slowest by the first half of 2018.

The UK economy shrunk by more than 6% between the first quarter of 2008 and the second quarter of 2009 and took five years to get back to the size it was before the recession. Had the pre-2008 momentum been maintained it has been calculated that productivity would have been 20% higher than it actually was at the end of 2017. The size of the UK economy has increased by just 9.7% since its pre-downturn peak according to the ONS (Office for National Statistics).

The impact of confidence – or lack of it – on the UK economy in 2018

It is generally accepted that from large corporates to SMEs, businesses dislike uncertainty since it has a significant impact on their ability to plan ahead with any confidence.  Confidence, or lack of it, also affects the behaviour of investors and lenders when considering investment in growth. This can be seen partly in the behaviour of the stock market, which has been decidedly volatile in the last two years, thanks to three main factors: the ongoing opacity of the Brexit outcome, the potential for a change of government to one that is viewed as anti-capitalist, and the potential consequences of a US trade war with China.

The rapid upturn in markets following the announcement after this weekend’s G20 summit of a 90-day suspension of tariffs to allow for US-China trade talks is a good example of volatile market sentiment.

PWC (Price Waterhouse Cooper) analysis reflects some of this sentiment in its most recent assessment of the UK economic outlook, which expected growth to remain modest at 1.3% in 2018 and 1.6% next year.

IHS Markit/Cips monthly snapshots also reveal levels of confidence among different sectors of the UK economy. Its most recent Services sector (retail, hotels and transport) confidence indicator had dropped from 53.9 to 52.2.

A Dun & Bradstreet survey of SMEs in November also found that 40% felt Brexit had slowed their growth and another piece of research by Deloitte found that only 13% of CFOs were more confident than three months ago and 79% felt that the longer term business environment would be worse after the UK leaves the EU.

Both the ONS and the Bank of England’s most recent assessments (to September 2018) indicated that investment by companies fell by 0.7 per cent in the three months to June, following a contraction of 0.5 per cent in the first quarter and that many businesses are putting investment on hold.

The Investment Association has calculated that UK investors have pulled nearly £9 billion from funds investing in British companies since the referendum.

Clearly confidence is crucial to investors as well as to business planning.

The health – or otherwise – of sectors in the UK economy

As I reported in my latest blog on the quarterly insolvency figures, there is a gradual upward trajectory in insolvencies which accelerated in the third Quarter with an increase of 8.9% on the previous quarter, driven largely by CVLs (Company Voluntary Liquidations) primarily in the construction, wholesale and retail sectors.

Retail sales were down in October and house price growth has been stalling throughout the year and is now at its weakest level since 2012.

However, the fall in the value of £Sterling against other currencies has arguably benefited the leisure and tourism industries since it makes visiting the UK more attractive to overseas visitors. This is borne out by the ONS growth figures for Q3, which showed that rolling three-month growth was 0.6% in September 2018, building on growth in the previous two months.

It has also benefited the car manufacturers, whose exports to non-EU countries increased by £1bn, while imports fell by £1.7bn, in the three months to September. Domestically, however, trade in motor vehicles decreased by 6.2% in September which might suggest a decline in consumer confidence.

The impact of £Sterling devaluation is also reflected in the latest ONS figures, that showed that there has been an increase in UK firms trading internationally by almost 16,000 last year. The total of 340,500 businesses trading abroad represents 14.3% of non-financial businesses in Britain. Non-financial services made up 53.1% of Britain’s international traders. Manufacturing growth also resumed in Q3 after two consecutive quarters of contraction.

Traditionally, the UK’S financial sector has been the strongest part of the UK economy, but there are some worrying predictions on the horizon with the possibility of an estimated 5,000 City jobs being lost, according to the City minister, John Glen, and the Bank of England, and as many as 37 finance firms potentially preparing to relocate to Europe. Indeed, many have already established offices abroad as part of their Brexit planning.

It should be emphasised that both a degree of clarity over the eventual position of the UK economy outside Europe and a longer time perspective are needed to be able to predict the future for the UK economy with any certainty.

But, all in all, the picture at the end of 2018 is decidedly mixed and it remains to be seen whether investment will recover and exports will continue to increase in the coming year.

How can the causes of investment failure be minimised?

the devastating consequences of investment failure in the 1930sPerhaps the most high-profile business collapse of the year has been the construction giant Carillion, reinforcing the message that no business is too big to fail and that no-one is immune to investment failure.

It prompted questions over the integrity of its auditors KPMG, who in March 2017 had expressed no concern over reported profits of £150m, even though four months later these proved to be illusory.

It also prompted an exodus of investors once the company’s debts became clear and confidence in its viability plummeted, thereby precipitating the collapse.

But should the investors have known better than to trust a business that diversified into a range of disciplines outside its core competence and embarked on a series of take-overs?

There are many causes of investment failure. It is not a precise science and it does involve a degree of trust, not to mention emotion. Too many investors fail to carry out due diligence before they decide where to put their money.

So, the first thing to do to guard against investment failure is to check more than your target’s profit and loss account. You should also look at its balance sheet and its cash flow statement. You might also ask if you understand the business, how it makes money and what it does with the money it makes. It is all about understanding and assessing the risk factors.

Some causes of investment failure

These include a lack of knowledge about an investment prospect, failure to understand why someone might be recommending an investment or using stock analysis reports from sources that are less than trustworthy.

Having no clear goal or strategy when investing is another pitfall. Knowing what you can comfortably afford to lose and how strong is your appetite for risk is essential.

Investment requires discipline and the ability to be patient as well as identifying the right targets for your investment.  It helps also to have a financial adviser you know and trust, who will guide you to developing an appropriate balance of risk weighted returns in your investment portfolio, so that it is not over- or under-diversified.

Another trap that can lead to loss due to poor investments is over-confidence or expecting a significant return in a very short time frame since this becomes like gambling. Investment is, or should be, a long term activity with a level of monitor of how your investments are performing making decisions about your portfolio.

Finally, it is important to remember the warning that the value of investments can go down as well as up, indeed some investments can be wiped out where for most investors the strategy should be based on understanding risk parity.

How much longer before SMEs get a fair system for dispute resolution with the Banks?

fair dispute resolution with the banks?It looks likely that SMEs still have some time to wait before a cost effective and fair system for dispute resolution with the Banks becomes a reality.

It is now approaching ten years since SMEs’ scandalous treatment at the hands of RBS (Royal Bank of Scotland) and its insolvency arm GRG (Global Restructuring Group), and of HBOS Reading emerged prompting investigations into the way the major banks treat their SME customers.

In July, the FCA (Financial Conduct Authority) announced on completion of its RBS investigation that its “powers to discipline for misconduct do not apply and that an action in relation to senior management for lack of fitness and propriety would not have reasonable prospects of success”.

Andrew Bailey, FCA Chief Executive admitted that its inability to take action should not be seen as condoning RBS’ behaviour.

Earlier in the year UK Finance, the trade body for banking and finance, had appointed Simon Walker CBE – the former Director General of the Institute of Directors – to review the disputes and resolution process.

The result of this SME Complaints and Resolution Review was published late last month and concluded that setting up a new tribunal would be too costly for both Government, SMEs and banks and instead has supported the FCA’s planned extension of powers for the Financial Ombudsman Service to cover business banking customer complaints.

Not surprisingly this has been welcomed by some Banks and UK Finance has called the review a “valuable contribution” to the debate.

Nevertheless, the APPG (all-party parliamentary group) on fair business banking, led by Kevin Hollinrake, has repeated its call for the creation of a financial services tribunal and for a compensation scheme for business customers who were victims of the RBS and HBOS behaviour.

The APPG argues that Walker’s report clearly identifies that there is a limit to the proposals, which do not extend beyond a compensation limit of £600,000, cannot compel witnesses, cannot force disclosure of information nor deal with insolvency issues.

It has also been argued that The Financial Ombudsman Service, even with extended powers, is insufficient since the maximum compensation it can award is £350,000, regardless of the £millions in losses that some SMEs have sustained.

Equally, many SMEs have argued that pursuing complaints using the civil courts as an alternative is hugely costly since large defendants generally adopt a strategy of attrition with the aim of causing their SME claimants to run out of money before the case is heard.

It looks as though there is likely to still be a considerable wait before SMEs get a fair and equitable system for resolving disputes with the disproportionately more powerful banks.

Why the big four auditors are under intense scrutiny – an update

investigation into the big four auditorsFollowing the collapse of the company Carillion in February this year the role of its auditors came under the spotlight and investigations were promised, notably by the FRC (Financial Reporting Council) and the CMA (Competition and Markets Authority).

The reason for this was that the business had won several large public sector contracts, among them to build two hospitals, and also because its collapse put a number of subcontractors and jobs in jeopardy. However, primarily it was because its financial health was revealed to be considerably shakier than the directors had suggested.

The company’s annual audit had been carried out by KPMG, one of the big four auditors, and in March 2017 it had expressed no concern over reported profits of £150m, even though four months later these proved to be illusory. Perhaps they may have been reassured by the company’s ‘internal auditor’, Deloitte, which might also be looked into since it may have involved helping ‘massage’ numbers for KGMG to report on.

The role of the auditor is  ”to provide an independent opinion to the shareholders on the truth and fairness of the company’s financial statements,” according to The Institute of Chartered Accountants in England and Wales (ICAEW), one of the bodies appointed to approve and register auditors. Auditors’ reports, filed at Companies House, are used by suppliers and other interested parties to make decisions about their involvement with a company.

Not surprisingly, when the FRC, published the results of its annual inspections of the big four auditors in June it singled out KPMG for an “unacceptable deterioration” in the quality of its work.

But it also found that the overall quality of the audit profession is in decline and that only half of KPMG’s FTSE 350 audits. were deemed satisfactory.  In fairness it should be said that the FRC scores for the others in the big four had also declined. Deloitte scored 79%, down from 82% last year, EY fell from 92% to 82% and PwC was down from 90% to 84%.

It also fined PwC (Price Waterhouse Cooper) £6.5 million for its failings in auditing of retailer BHS two years before its collapse.

The calls for a radical overhaul have been growing as there seem to be so many accounting scandals, such as the recent problems with Patisserie Valerie. The calls reflect public concern about a conflict of interest since these businesses also earn massive fees from their clients for consultancy work.

Earlier this month KPMG announced that it will no longer do consultancy work for the UK’s biggest companies if it is also auditing them.

So when will there be some answers on the big four auditors?

According to a report in CityAM last week there are now five investigations either pending or on the go.

The CMA investigation following Carillion was expected to reveal its findings before the end of the year but it has recently announced that it is also intending to study the entire auditing market to see whether the big four were crushing competition from smaller firms.

Sir John Kingman, the chairman at Legal & General, was tasked by the government this summer with reviewing the operations of the FRC, whose outcome may strengthen its powers. The FRC is also reviewing itself separately from the Kingman investigation.

Shadow Chancellor John McDonnell has commissioned Professor Prem Sikka, an academic at the University of Sheffield, to review the sector and make recommendations with this report due by year end.

Finally, the Beis (Business, Energy & Industrial Strategy Select Committee) leader Rachel Reeves (Labour) has announced that it will review both the Kingman and CMA reviews, probably starting in January.

It will take a while before all the results are in and revealed but it looks like time is running out for the big four auditors and they can expect changes to regulation, to their ability to carry out both audits and consultancy, and possibly, some hefty fines at the end of it all.