MIAMI – Three quarters of treasury and finance professionals fear the consequences of the so-called fiscal cliff, according to an onsite survey taken at the 2012 AFP Annual Conference. Respondents believe the economy will worsen without action to address the tax cuts and automatic spending cuts due to kick in at the end of the year.
Fully 39 percent of finance executives said that sluggish economic conditions and weak demand also are uncertainties discouraging their companies from making strategic investments in expansion and hiring.
Regardless of which candidate wins the U.S. presidential election this November, 63 percent of survey respondents expect the election to have no significant impact on business conditions and 71 percent anticipate no significant change in their investment spending after the elections.
“Companies are looking beyond the elections,” said Jim Kaitz, president and CEO of AFP. “The most important issue is resolving long-term fiscal and deficit issues.” Negotiating the fiscal cliff and putting America’s finances on a sound footing are the key aims of corporate treasurers.
Asked what they saw as the most important areas for Washington, D.C. to focus on after the election in order to support business activity and economic growth, the survey respondents indicated:
- Resolving long-term fiscal/deficit issues (63 percent)
- Implementing changes to avoid the fiscal cliff (49 percent)
- Reducing regulatory complexity and uncertainty (42 percent)
- Resolving political gridlock and improving the tone of political debate (37 percent)
- Corporate tax reform (33 percent)
- Policies aimed toward the safety and soundness of the banking system (20 percent)
- Addressing unfair and anti-competitive practices of foreign companies (10 percent).
Asked if they expected lower corporate bank balances when the unlimited FDIC insurance on non-interest bearing transaction accounts expires at the end of the year, 48 percent saw no significant change while 49 percent expected to lower their balances.
“This survey reiterates our view that treasury professionals see regulatory change as a significant concern for their business,” said Bob Stark, VP of strategy at Kyriba, underwriter of the survey. “It is also very interesting to note, although not entirely surprising, that half of the respondents expect to reduce their cash held in bank accounts at the start of next year. This change will increase the need for improved cash visibility, a trend we have seen throughout the market.”
The fiscal cliff was also addressed during Tuesday's Certification Luncheon. Keynote speaker Betty Liu, host of Bloomberg Television's In the Loop, emphasized the severity of such a drastic reduction in the deficit, noting that it must be addressed swiftly regardless of who wins in November.
Kevin Roth, AFP's
managing director of research, noted that AFP members, regardless of political affiliations, recognize the importance of finding a solution. "The short-term view is to address the fiscal cliff and the long-term
view is to meaningfully address the deficit," he said Kevin Roth. "Regardless of who wins the election, the
issues are still there the next day. This is a call for real leadership
from both sides of the aisle."