OPINION - 'Megatrends' into the next millennium

If you want to make the gods laugh, just tell them your plans for the future. Nevertheless, every sector that wants to remain successful does need a systematic approach to scanning trends in its environment against which to review its strategy. In that respect, accountancy is no different.

That is why the English ICA set up the 2005 working party. Its purpose has been to look up to ten years ahead and to analyse the environmental forces which would have an impact on members, firms and the profession generally. This analysis should then form the basis for guiding future policy of the Council.

The working party has interpreted its remit as being to help to keep chartered accountants influential and prosperous, possibly the one proposition behind which all members of the Institute could unite. In taking on this remit, the working party is aware of the astonishing success of the British profession over a generation to 1990.

Despite the subsequent years of recession, which hit the profession hard, accountancy remains one of the UK’s few world-beating sectors. But past success is no guarantee for the future. Rather, continuing prosperity and influence depend crucially on the quality and relevance of the profession’s offerings to its markets.

The 2005 working party started its work by looking at ‘the megatrends’ in business and society; those givens which are inexorable and which cannot be influenced much, if at all, by the UK profession. In this article we examine these megatrends for the profession and consider their implications.

Permanent revolution

The first of these major trends concerns the internationalisation of business. Over the last few years, there has been an almost exponential growth in cross-border investment. Equity capital from the United States to overseas markets is forecast to increase dramatically. There will be a tremendous growth in pension funds in developed economies in the next few years. International trade is growing faster than domestic activity in most countries. Regulation too will become increasingly international, at the expense of national governments and standard-setters. Other global forces are changing the criteria for business success. The result will be to increase pressure from the profession’s stakeholders for international comparability in financial reporting, for real time relevance in financial and management accounting systems and for added value.

Those stakeholders will intensify the growing competitive pressure on organisations. This will be particularly true for businesses operating mainly in the European economies. Low-cost centres will exacerbate competitive trends. One response by major companies will be a permanent revolution in their internal organisation, external alliances and acquisitions policies – all areas where accountants have a role to play.

The working party saw information technology as the force likely to have the greatest direct impact on UK accountants. As the capabilities of IT rise and cost falls, the routine work of many involved in, for example, tax compliance or management accounting will be deskilled or threatened.

IT will also facilitate the remote handling of some other areas of professional work from low-cost centres overseas. But, for those able to use the new technology to add value for clients and employers by analysis and interpretation, opportunities will be good.

In the economy as a whole one megatrend is for increased demand for knowledge workers, including professionals such as accountants. But for them and all other workers careers are likely to be less secure and predictable.

As companies respond to competitive pressures, they will be less able to offer stable employment for long periods. Portfolio and serial careers will become more common. To succeed, individuals will need to take greater personal responsibility for maintaining their competence and marketability.

Results and prospects

Finally, the working party sees powerful forces for increased accountability in society, whether in terms of the efficiency of public services, environmental reporting or the performance of companies. An ‘audit society’ of this sort offers clear opportunities in the public and private sectors for accountants, provided they develop indicators and reports relevant to users.

There is plenty of scope for debate about the speed of change resulting from all these megatrends, and about the impact of their interaction.

What there is no scope for is denial. The profession needs to take those changes seriously, if it is to avoid a situation in which there are too many accountants chasing too few jobs. We cannot easily control the supply of accountants, but we can meet new opportunities.

If there is one general theme that has emerged, it is that of the need for added value. Many traditional markets for accountants’ services in business and practice are maturing or becoming more competitive and thus less profitable. But clients and companies will want high quality business information and advice and few are better placed than accountants to provide it. Capitalising on the emerging opportunities will require determined effort by individual chartered accountants, firms and their professional body if the future is to be as successful as the past.

David Stewart is a partner in Coopers & Lybrand and Andrew Colquhoun is chief executive of the English ICA.