The boom years are over for business, warns FD

Mr Pennycook, winner of the FTSE 100 Finance Director of the Year in 2011, said businesses need to accept that the boom years are over.

“It’s going to continue to be a difficult time. It’s looking like the UK will still be bumping along with a low growth trajectory,” he said.

“I think in the UK we can be a bit more confident beyond 2013, but the growth trajectory is unlikely to get that much steeper.”

He believes consumers will feel slightly better in 2014 and 2015 following an increase in disposable income, but the improvement will be slow and gradual.

“There is a sense that businesses need to adapt to these conditions and get on,” he added. “We’re five years into the downturn and that cliche about the ‘new normal’ is relevant. Five years after Lehman Brothers we have to plan for the long term. We can no longer see this environment as temporary. We have to assume this is a low growth domestic environment for the next 10 years,” he said.

He said that many companies – and their finance directors – have spent the past two or three years looking at the short term and focused on ways to get through the immediate turbulence.

“That’s got to change this year,” he said.

“For finance directors, 2013 is going to be a year when the balance sheet is particularly important as boards start to turn their minds to the longer-term prognosis.

“The critical factor is interest rates and financing costs, and most boards have to make some interesting choices. For example, the low rates environment does some pretty bad things for the pensions outlook for UK Plc and that’s becoming a serious issue.”

He believes that big retailers that are reliant on stores for sales growth rather than the internet, will find the future challenging.

Last week Bradford-based Morrisons reported a 2.5 per cent fall in like-for-like sales in the six weeks to December 30 and blamed the fall on a lack of online retailing and convenience stores – areas that are enjoying double digit sales growth at rival supermarkets.

The group has entered the non-food online market with its purchase of Kiddicare and recently launched an online wine offer, but it is still to announce its plans for online food retailing.

“Even for a domestic business like Morrisons, there are clear opportunities in international expansion and innovative approaches,” said Mr Pennycook.

“Our web-based business is growing well here, but it’s actually opening up international markets too.

“We do have a world class online retail sector. Kiddicare has plans to begin to sell internationally. I’d expect we’d do that in due course.”

Talking about his plans for the future, he said he will look for a chief executive or chairman role and would ideally like to stay in Yorkshire.

“I’ve done 20 years as a public company finance director. I’m not sure if you get that much for murder these days,” he joked.

“I want to do other things and build a new career. The family will stay in Yorkshire. We love it here. I’m an adopted Yorkshireman now.”

He lives with his family just outside York. He believes that finance directors have had a “much needed” impact on the way businesses operate.

“It’s fair to say that FDs have had a good war in terms of the downturn,” he said. “We’re seeing a new generation of FDs and senior financial managers come through who will carry the lessons of the last five years.”

A strong background

Richard Pennycook became Morrisons’ finance director in 2005.

Before joining Morrisons he was the finance director of motoring organisation RAC and before that he was finance director of cider group HP Bulmer, homewares chain Laura Ashley and pubs group JD Wetherspoon. He is currently a senior independent director and chairman of the audit committee at York-based housebuilder Persimmon.

He was awarded FTSE 100 Finance Director of the Year in 2011 at the FDs’ Excellence Awards, held in association with ICAEW.

Nominations for the 2013 awards close on March 1.