Inflation Poses Biggest Threat to Business Recovery, ACCA Survey Reveals

By Acca the Association Of Chartered Certified Accountants, PRNE
Monday, April 11, 2011

UK Still Lags Behind Other Markets as Government Approval Ratings Fall

LONDON, April 12, 2011 - Escalating global inflation is the biggest challenge to businesses
struggling to recover from the economic downturn, according to the latest
Global Economic Conditions survey of finance professionals by ACCA (the
Association of Chartered Certified Accountants).

The survey of more than 2,300 accountants in March 2011, the largest ever
undertaken by ACCA, shows that for the first time more than half (51%)
reported problems with rising operating costs, making this the most commonly
cited business challenge. Only 31% had reported rising costs as being a
problem when the question was asked in Q4 2010.

While they reported that there were still businesses opportunities, these
increased costs made it more difficult for accountants to spot opportunities
for growth or cost-cutting for the businesses they advise.

Report author Manos Schizas, senior policy adviser with ACCA, said: "The
huge rise in inflation has been the most worrying development to emerge from
our latest survey. More than half of respondents reported problems with
rising operating costs, which will hinder their ability to look for new
opportunities at the time when businesses desperately need to fill the order

"The number of finance professionals worried about inflation will also be
a concern to governments that have put in place a range of measures to
control rising prices. These measures were designed to ensure that businesses
do not fail because they cannot afford the raw materials or expertise," he

Responses suggest that, the global economic recovery picked up speed
again in early 2011 after briefly going into reverse at the end of 2010 - but
that conditions remain fragile.

Accountants reported that both demand for goods and services and cash
flow conditions have continued to improve around the world. While this has
generally led to a more stable outlook for employment and investment in
developed countries, accountants in the developing world reported slightly
less investment in staff and more layoffs than last quarter as businesses
come to terms with the weaker-than-expected recovery.

In the developing world, members saw an opportunity in exports; relying
mostly on strong supply chain relationships, investments in quality, and
innovation. Accountants in developed markets, however, reported fewer
opportunities in all of these areas compared to previous quarters -while
still anticipating a rise in new orders for their businesses.

With the global economic recovery still far from assured and Europe still
in the throes of a financial crisis, members were asked how they thought
government spending in their countries would change in the mid-term.

Although western countries were still expected to embrace austerity,
respondents around the world agreed that their Governments were more likely
to increase spending in order to support the recovery.

Overall, members around the world feel that fiscal policy is now more of
a balancing act than before, especially in fast-growing markets where rising
inflation has reduced the number of options available to policymakers. Almost
one in six respondents expect their government to get spending dangerously
wrong over the next five years.

The view from the UK

The UK continued to lag behind ACCA's other major markets, with nearly a
third of respondents saying things are 'getting worse' - the highest figure
in two years. Accountants in small and medium sized enterprises (SMEs) that
remained resilient throughout 2010 now appear to be losing confidence. Their
colleagues in the public sector are also feeling more pessimistic now than in
the depths of the recession.

The coalition government's previously high approval ratings among members
are now falling.

Access to finance has deteriorated again after reaching the lowest levels
previously on record in Q3 2010. However, as this has yet to translate to
tighter cashflow conditions, the outlook for employment and investment has
been fairly stable. That said, demand appears to be under pressure and
expectations of new orders are down.

Notes to Editors

1) ACCA (the Association of Chartered Certified Accountants) is
the global body for professional accountants. We aim to offer
business-relevant, first-choice qualifications to people of application,
ability and ambition around the world who seek a rewarding career in
accountancy, finance and management.

2) We support our 140,000 members and 404,000 students in 170
countries, helping them to develop successful careers in accounting and
business, with the skills required by employers. We work through a
network of over 80 offices and centres and more than 8,000 Approved
Employers worldwide, who provide high standards of employee learning and
development. Through our public interest remit, we promote appropriate
regulation of accounting and conduct relevant research to ensure
accountancy continues to grow in reputation and influence.

3) Founded in 1904, ACCA has consistently held unique core values:
opportunity, diversity, innovation, integrity and accountability. We
believe that accountants bring value to economies in all stages of
development and seek to develop capacity in the profession and encourage
the adoption of global standards. Our values are aligned to the needs of
employers in all sectors and we ensure that through our qualifications,
we prepare accountants for business. We seek to open up the profession to
people of all backgrounds and remove artificial barriers, innovating our
qualifications and delivery to meet the diverse needs of trainee
professionals and their employers.

    For further information, please contact:

    Laura Strong, ACCA Newsroom

For further information, please contact: Laura Strong, ACCA Newsroom, +44(0)20-7462-8921, lstrong at

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