“UK banks are being overwhelmed by wave after wave of new regulation and it is right that the Commission recognises the risk of over-prescriptive rules. As highlighted in the report, international agreement on remuneration changes is vital to maintaining the UK’s competitive position, but this is likely to be a hard task given the range of international proposals already out there.

“There needs to be an appropriate balance under the new senior persons regime otherwise there is a real risk that these roles become so onerous that no-one will take them on."

Bonus deferral:

Caroline Jones, head of PwC's human resource services team in the West & Wales, said: “Regulators are looking to deferral as the answer, but we're sceptical this will do much to change bankers’ behaviour as deferred bonuses hold little value in their eyes. Our research shows that people discount bonus payments by around 25% for each year they are deferred. Deferring bonuses for even longer periods, particularly if claw-back becomes more likely, will mean they are entirely disregarded in employees' eyes.

“Deferral has a role to play in creating more sustainable pay practices, but too much focus on deferral is misguided. It's more important to focus on what people are getting paid for than how they are getting paid. With less deferral it's possible to pay people less in the first place.

“The onus is now on the regulator to judge whether pay measures within banks reflect an appropriate balance of risk and reward. This is a hard task and it is critical that regulators are given the tools and training to accurately assess this.”

Use of bail-in bonds:

Caroline Jones, head of PwC's human resource services team in the West & Wales, said: “Employees who have suffered heavy recent losses on their shares may actually prefer bail in bonds, which will have much more certain value. However, they won't have much impact on behaviour. The lesson from the last crisis was that the value of debt instruments hardly shifted until far too late, when the crisis was already upon us. It's another example of regulators thinking that pay mechanisms can influence behaviour instead of focussing on what people are paid for in the first place. "

Banning buy-out:

Caroline Jones, head of PwC's human resource services team in the West & Wales, said: “The practice of "buying-out" an employee's deferred awards when they change jobs has many unintended consequences. Not only does it prevent a firm applying claw-back to an employee that has left, it actually provides an incentive for employees to leave if they see bad news coming. Reform in this area would be welcome, although may be difficult to achieve in practice given the EU regulatory framework."

Avoidance of reliance of narrow measures of bank profitability for calculating remuneration:

Caroline Jones, head of PwC's human resource services team in the West & Wales, said: “Encouraging regulators to be more challenging on the link between risk and reward is a good thing as this is an area where there hasn't been enough regulatory scrutiny. The proposed disclosures on how risk and changes in risk have influenced pay outcomes will place the onus on Remuneration Committees to explain their decision making and will help both shareholders and regulators discharge their oversight responsibilities."

Email: Caroline Jones
Tel: 0117 928 1490

UK Government and also the local South West Local Enterprise Partnerships (LEPs) are actively supporting eligible businesses in England by way of cash grants and loan funding. The main UK Government offering is under the Regional Growth Fund (RGF), whereas the LEPs are offering loan funding at favourable terms.

Grant funding can range from 10-50% of eligible project costs for some companies, depending on the size and location of the company and also the nature of the project. There is a minimum threshold for the RGF of £1m of grant, so Companies need to consider the overall project funding plan carefully. Round 4 of the RGF is currently closed, with the successful applicants due to be announced over the Summer. We await the next announcement of RGF funding from UK Government.

There are other funds, such as Grant for Business Investment, looking to create sustainable employment in South West and the Springboard Fund, focussing on the development of innovative ideas for Devon and Cornwall. Both of these schemes are only available for Companies based in the South West.

Grant funding is discretionary and negotiable and there is no automatic entitlement to it. So if your company is looking for grant funding to invest, and create/safeguard jobs, then you should act now, as better prepared and informed applications are likely to be more successful.

If you would like further information regarding the above, please  Gareth Hodge, Tel: 029 2080 2673

The findings are from a PwC study that goes further than previous reports by examining both the opportunities and the threats from projected climate change overseas. It compares these with those linked to climate change in the UK.

The study considers the projected impacts in the 2020s, the 2050s and the 2080s under a scenario broadly aligned with limiting global warming linked to climate change to 2C, consistent with the goal of the international climate negotiations.

The report finds that the impact and magnitude of climate threats overseas could be an order of magnitude larger than climate change impacts at home.

Jeff Brown, PwC sustainability and climate change expert at PwC in the West and Wales, said “Climate change acts a multiplier of risks and opportunities. Taking action now increases the UK’s capacity to adapt and also ensures we make the most of the opportunities, by investing in the skills, R&D, and services that are needed. The findings are a first step in understanding the likely possible impacts on the UK and the unavoidable consequences of climate change in other countries.”

Amongst the key impacts and opportunities highlighted: 

• Business & investment: The scale of UK investment abroad means that UK investors are directly exposed to climate change threats overseas. The UK is also exposed to climate related events internationally through its insurance investments.
• Food supply: Extreme weather could exacerbate volatility of commodity prices and cause disruptions of supply, due to the concentration of global production of foodstuffs including wheat, maize and corn.
• Skills, export and investment opportunities: The UK is a key provider of technologies and services such as flood defence, climate modelling, and insurance, representing a strong opportunity for exporting adaptation goods and services. 
• Attractiveness of the UK: The study also finds that the UK’s adaptive capacity to climate change could increase its future attractiveness to investors, and the possibility of new shipping routes through the Arctic could lower the transport costs of trade to the UK.

Despite the UK’s strongest links being with industrialised countries considered less vulnerable to climate change, the study illustrates how recent experience of climatic events in developed countries could still have global implications on UK supply chains or commodity pricing and supply, with significant costs attached. 

Jeff Brown, PwC sustainability and climate change expert, continued, “Whilst further detailed modelling is needed, the report’s findings are an unequivocal call to action for business and policy makers alike to examine how the UK can avoid the worst impacts of climate change globally, and demonstrate the business case for further and faster action to tackle rising emissions. We can’t afford to think of ourselves as an island when it comes to risks in investment, supply chains and trading.”  

Supply chain risks are highlighted as a particular area for focus, given the threats and opportunities related to the concentration of key imports, in particular food, from a handful of countries. The study highlights supply chain resilience and hedging by food and drink manufacturers as examples of how companies are managing climate change exposures.

The study, commissioned by Defra, forms part of the Government’s research for the Climate Change National Adaptation Programme (NAP). The NAP report, which will be published by Defra, will set out how government, businesses and communities are preparing for and adapting to climate change. It is a call to action for businesses to make sure they are planning for the future.

For an executive summary of the report, please contact jessica.a.poole@uk.pwc.com.

About the study:

1. The study was commissioned to build on existing analysis, including work by Foresight, to improve understanding on the international threats and opportunities of climate change to the UK. The study is designed to help organisations prioritise the areas for potential future analysis to further quantify the impacts for individual sectors and businesses.
2. The study examined a number of themes impacted by climate change – business (trade and investment), infrastructure (focus on energy), food, health and wellbeing and foreign policy. This is  broadly aligned  with the UK domestic Climate Change Risk Assessment and the Foresight study into international climate change[1]. The magnitude of the threats and opportunities were identified by reference to 1) the UK’s links with other countries and regions within thematic areas 2)the climate impacts around the world against the IPCC Fourth Assessment Report and 3)the vulnerability of different countries and regions in responding to climate change.  For further details of the methodology please see Appendix A of the main report.
3. The analysis considers threats and opportunities in the 2020s, the 2050s and the 2080s, under a ‘Medium Emissions Scenario’. This scenario is broadly aligned with the 2^oC target expressed in UNFCCC discussions. More recent evidence, including from UNEP, the International Energy Agency, the World Bank and PwC’s Low Carbon Economy Index, suggests that a lack of progress in recent years to limit emissions growth means that this scenario will be increasingly difficult to achieve.  In that respect, the identification and magnitude of threats and opportunities raised in this report may be at the conservative end of the scale with much more severe impacts possible, particularly over the longer term.
4. Amongst data quoted in the report from wider independent sources include: the amount of UK investment abroad is significant (£9.9 trillion in 2010); Food imports currently account for nearly half of the UK population’s food consumption, and in 2011, 25 countries accounted for 90% of UK food supply.
5. PwC’s global sustainability and climate change team of over 700 professionals is led by a UK team of over 100. They work with public and private sector clients, NGOs, private entrepreneurs, policy makers and think tanks delivering the complete range of advisory and delivery services related to sustainability and climate change, risk analysis and performance measurement tools, climate modeling, measurement and reporting. The firm won UK Consultancy of the Year in 2011 & 2012 in the BusinessGreen Leaders Awards recognising the leaders and shapers of the emerging low carbon economy.

The European Commission has approved a directive introducing new disclosure requirements for entities in the extractive and logging industries. Affected entities will be required to report annually payments made to governments, and to make this information available to the public. Each EU member state is responsible for passing the requirements of the directive into local legislation. It is expected that the requirements will come into effect for periods beginning on or after 1 January 2016. For further details see Straight away 121.

Please contact Jeff Brown for more details: T: 07739 449083, Email: jeffery.a.brown@uk.pwc.com

The Department for Business, Innovation & Skills (‘BIS’) has now published the revised narrative reporting regulations and an update on the revised remuneration reporting regulations that includes what is likely to be the final form of the remuneration reporting regulations. In effect this completes the set of new reporting requirements that will apply to companies from September 2013 year-ends. See Straight away 120c for more information. 

Please contact Jeff Brown for more details: T: 07739 449083

Email: jeffery.a.brown@uk.pwc.com

Please contact Jeff Brown for more details: T: 07739 449083, Email: Jeffery.a.brown@uk.pwc.

Companies from the Eurozone have proved to be the biggest fallers in this analysis with only 14 companies now in the top 100 compared with 26 in 2008. 

From a level of $13.5 trillion dollars in 2008, the financial crisis wiped off more than $5 trillion by 2009. Market capitalisation values have taken four years to recover and top pre-crisis levels, PwC has found. From a low of $8.4 trillion in 2009, the world’s 100 biggest companies now have a combined market capitalisation of $13.6 trillion.  

In its latest report, PwC ranked the top 100 global companies by market capitalisation and compared the movements from March 2008 annually to March 2013.  After identifying the biggest rises and falls, the report also examines country and sector dynamics and analyses how the global landscape has changed.

The top five risers added a collective $ 701 billion in market capitalisation in just five years. Technology giants dominated the ranks of the best performers – Apple increased by $290 billion alone over the period and Google $125 billion.  However the top five fallers saw their market cap drop by a collective $737 billion. Oil and gas and energy companies took four of the five losing spots.    

David Charles, partner, PwC in the West & Wales said: “The US is dominating the ranking, but what is truly remarkable is the ability of the US to create new trailblazers. 15 years ago companies like Apple and Google had either just been  founded or were not recognised as having that potential.

“Today these companies rank first and third in the list of the 100 most valuable global companies. US companies in growth sectors like Health Care and Consumer Services are similarly successful. These companies are capable of setting and recognising new trends and – most importantly – creating business models that make these developments pay on a global scale. With this innovative drive, other regions and countries will have their work cut out to compete with the US on the same level.”

Eurozone companies have been worst hit by falls in market capitalisation. Of the 26 companies present in the top 100 in 2008, only 14 remain in 2013. Those that fell out were from Germany (5), France (5),  Spain (3) , Italy (2) and one each from Netherlands, Finland and Luxemburg. This also partly reflects the fall in the value of the Euro against the dollar.

Despite the size and significant growth in the Chinese economy, Chinese/Hong Kong companies did not feature as highly as perhaps expected. There are just 9 companies from China/Hong Kong in the Top 100, and there was no real upward trend since 2008 (then 8).  The nine companies represented on the list in 2013 are mostly from the Banking, Insurance and Energy sectors. These companies are of huge local and regional significance but have yet to expand globally.

Jass Sarai, UK technology leader, PwC said: “Within the UK, technology market values remain under pressure when companies only operate in their local markets. Those which are truly global benefit from global trends and their value reflects this.

“In addition, those with real intellectual property and emerging technology which results in those businesses becoming market leaders, the  drive up market values.”

To read the full report, please click here. 

Notes

PwC’s  IPO centre brings together our global expertise ensuring that as one firm we provide companies with the right mix of sector and IPO expertise combined with relevant local and international market knowledge. Through the IPO centre we are able to connect companies with the right PwC capital market specialists, take them through the flotation process and prepare them for life as a public company, regardless of the market they choose to list on.

To access our report and watch our video summary, please click here.

Over the past few years, local government has demonstrated its ability to deliver ambitious and far reaching savings programmes. While council Chief Executives are still holding on to their confidence in meeting savings targets for the next year, our third annual local government survey shows that confidence in being able to protect services as well has fallen by 40% over the past year.

Beyond 2013/14, confidence in meeting savings targets falls with 57% of Chief Executives saying 2015/16 will be the toughest year to come.

Nine out of ten Chief Executives and Leaders now believe that some local authorities will get into serious financial crisis or fail to deliver the essential services that residents require within the next three years.

Almost all Chief Executives expect that the June 2013 Spending Review will mean further financial pressures for their councils. And almost all expect that welfare reform will lead to increased demand for council services.

Tough choices are ahead as the cracks begin to show and decisions get closer to the frontline. Councils need to act urgently to transform themselves into agile organisations and shape a role for themselves through a future of continued austerity.

Shifting priorities

Local authorities have largely made savings to date through focusing on 'how they work'. In future, the priority will need to move to 'what they do'. While there are still savings to be made when it comes to internal efficiency, the next few years are likely to see a shift in focus to managing demand, changing services levels and restructuring or closing frontline services. Our survey shows that so far Chief Executives are more likely to have embraced this agenda than Leaders.

To download the report or to find out more, please click here.

“Life is getting closer to the frontline and will soon impact on customers. Everything is up for review. There is no other option.”  Source: Council Chief Executive  

 “We are carrying out wholesale reviews of services challenging whether we should be delivering them at all, and if yes, do we have to be the provider?”  Source: Council Chief Executive

 Penny-pinched commuters are struggling to keep up with a rise in transport costs, a PwC survey out today reveals, with many making sweeping changes to their lifestyles.

In PwC’s Voice of the Consumer (VoC) survey of 2,000 people, over half say their transport costs have risen in the past year with many cutting back on essentials such as utilities, savings and leisure activities to offset the rise. In the West this was 52% but in some areas, such as Northern Ireland, 70% have cut back.  

Of all full-time workers surveyed, 59% say their monthly costs have increased.  Please click here to view our Inforgraphic.

Paying the Price for Travel?

Socialising, holidays and treats for children were all scaled back by respondents nationally and regionally. Of those that have seen transport costs rise over the past year, 47% have cut back on essentials, such as groceries and utilities. 

The survey shows that 25% of all adults have had to borrow money to cover their day to day transport costs with Londoners borrowing the most at 35%.

PwC’s, Simon Pilkington, government & public sector corporate finance leader in the West said:“The findings of our research highlight that in this era of austerity, many people are having to make difficult choices across their essential spend and lifestyle choices -  in particular around long term investments, leisure activities and groceries.

“Another interesting trend is the proportion of respondents looking at relocating or finding alternative transport modes to make the cost of travel cheaper.” 

 Andrew Sentance, PwC’s Senior Economic Advisor, added: “Transport costs have been rising for a number of years.  Since 2009 the transport component of the Consumer Prices Index has risen on average by 5.4% a year, and is one of the areas where prices have risen the fastest over this period. This is nearly three times the 2% inflation target and way ahead of the modest wage increases employees are seeing in their pay-packets.

“For many people, travelling is an essential area of expenditure which is required to get to work and to maintain contact with family and friends. It is not surprising therefore, that this survey suggests that consumers have had to make cutbacks in other areas of spending to pay for higher travel costs."

A  ‘Mr Average’ profile generated from respondents is a 39-year-old full-time worker earning £27,466. He takes home a net pay of £1,791.29 a month of which 8% or £145 goes on transport. Unemployed people in the survey spent £36 a month, by comparison and are likely to take the bus.

The survey also examines people’s preferred transport modes for commuting, leisure and personal use across the country which will be released later this month.

Notes:  

1. Regional information based upon the national sample is available upon request via the press office. 
2. The above percentage tables are based on those that have seen transport costs rise.
3. PwC surveyed 2,000 people for the VoC survey, split between 12 regions including Scotland and Northern Ireland proportionately to their share of the UK adult population. The data can be broken down into national, regional, commuter, general traveller and includes unemployed, retired, students and other not working.