Scotland held a referendum in September 2014 over their independence from the United Kingdom. An eventual “No” vote by 55% of the population was the outcome, but were the opinion polls any good at predicting this? And what does this tell us about our EU referendum vote – based on current polling?
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“No” was predicted, but the undecideds all went one way
If the 18 polls carried out in September 2014, only 2 predicted a “Yes” vote. The remainder all predicted “No”. The polls were very close near the end of the campaign.
So why was the victory so much bigger than the polls predicted?
As with any opinion polls about voting intentions there are a number of undecided voters. And if you look at the figures for the polls (link here to excellent Wikipedia page) it is clear that almost all the undecided voters landed on the “No” vote when standing in the polling booth.
So what does this mean for the current opinion polls about the EU Referendum?
You’ll probably be aware that the latest polls for the EU referendum are much closer than those in the Scottish referendum. It’s bloomin’ close…
Looking over the last ten polls we’ve got 6 wins for Leave, 3 wins for Remain and one dead-heat.
But the undecided vote is massive. It looks like it’s averaging toward about 10%
How will these undecided voters act?
I’m going to draw a parallel between the “No” vote in Scotland and the “Remain” vote in the EU referendum. Both votes are for remaining in a union, and both votes are risk-averse in nature (i.e. not embracing the uncertainty of a brave new world…)
So my prediction is that most of the undecided voters will side with “Remain” on polling day.
If my prediction is correct, we can make adjustments to the polling data by assuming that all “Undecideds” will vote “Remain”. Following this through, the shape of the last ten polls change significantly.
Rather than 6 results supporting leave, it’s now 2. Rather than 3 results supporting Remain it’s now 8.
So what does this mean?
In my opinion, this evidence strongly supports a victory for Remain. If voters act in a similar way as they did in Scotland, then the result of the EU referendum will be for us to stay in the EU.
Before David Cameron pops the champagne, it might be worth considering some of the issues with this hypothesis.
Scotland leaving the UK was a bigger decision. A new country would have been formed, and the underlying risk of uncertainty was higher. This will introduce bias, and perhaps a smaller number of undecideds will vote remain.
The U.K. is roughly 10 times the size of Scotland, and has many more regions with different identities and goals. Simplistic extrapolation of the Scottish data may lead to erroneous hypothesises.
The 2015 general election polls were almost universally wrong. The silent voters the pollsters missed could be missed again. Any theory using the polls as a baseline is therefore flawed.
Extrapolation of Scottish polls suggest victory for Remain camp due to undecideds converting to the perceived lower risk vote.
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Are you undecided on the EU referendum debate, and unsure how you will vote?
Check out my analysis of the UK import / export data, and perhaps you’ll become closer to a decision. If you find the following helpful, please share with your social media buddies via Facebook, twitter, and all the other sites!
In honour of the Euro 2016 competition, I am keeping score between the Leave Campaign, and the Remain Campaign. Any fact from my analysis that supports either campaign scores them a goal… Let’s see who wins 🙂
Please note I do not support either Leave or Remain side on this website. It’s up to you to make up your mind. I’ve been disappointed with the quality of information available throughout the campaign, and this is my small way of making a difference.
All data comes from HMRC site UKTradeInfo, an excellent resource to dig into the stats, if you’re that way inclined…
So how much do we import and export?
Let’s start off simple, looking at the totals for 2015. Figure 1 shows how our imports compare to our exports, and the breakdown of EU and Non EU countries.
A couple of clear facts emerge:
The UK imports more than it exports (£106 billion more!)
The EU is a major provider of imports (53% of total), and a major receiver of exports (44% of total)
Imports (-2.3%) and exports (-1.8%) were lower in 2015 than in 2014, but interestingly, the exports to Non EU countries increased (+4.7%), suggesting non EU countries were our source of growth in 2015.
This information has been used by both sides to prove their side of the argument.
On one hand, you can see that the EU is a huge trade partner with the UK, so vote Leave would impact this relationship and therefore hurt our economy.
On the other hand, the EU imports more to the UK as a percentage (53%) than it receives as exports (44%), suggesting the EU countries are benefitting from access to the UK as a market, without giving us supporting export trade that helps our economy grow.
Also, the only area of growth in these high level figures is exports to the Non EU partners (+4.7%).
Using a football analogy to keep score, I’ll award a goal to Remain due the size of the EU trade, but a goal back to Leave due the growth of the Non EU trade.
So we’re at 1-all after ten minutes 🙂
Let’s go deeper into the numbers…
So who are our major trade partners – EU and Non EU?
Figure 2 shows the split of the previous information by country. The top ten EU countries and top 7 Non EU countries are shown (otherwise the table gets too big to look at on a phone screen…!)
What are these numbers showing me???!!
This table shows the absolute value in pounds sterling of the exports and imports by country, what proportion of the total this makes up, and the change Vs. the prior year (i.e. growth or decline).
For example, The UK imports £61 billion worth of goods from Germany, which is 14.8% of our total imports, and these imports have grown Vs. 2014 by 1.3%. The UK exports £30 billion to Germany, which is 10.0% of our total exports, and the amount of exports have decline Vs. 2014 by 3.9%.
What are the facts from this information?
So you can draw your own conclusions from the table if you wish, however here are a couple of nuggets that jump out at me when reviewing the numbers.
I have cut the data into roughly equal thirds.
Large trade partners (Germany, USA and China) with over £30bn of either exports or imports
Medium trade partners (6 from EU, and Switzerland) with over £10bn of exports or imports
Small trade partners (everyone else – less than £10bn of exports or imports)
Of the large trade partners, USA and China have strong growth in both exports and imports. Germany has strong growth in imported trade into UK, but decline in exported UK goods to Germany.
Trade slowed with the medium partners – both imports and exports are lower than 2014, with the exception of Spain (EU) and Switzerland (Non EU).
The UK small partners trade slowed with the EU partners, but grew strongly with the Non EU partners.
Using the figures above, you could say that the UK trade with non EU countries is stronger than that of EU partners. Exports are are growing to Non EU trade partners, and imports from our top 2 Non EU countries (USA and China) are also growing. The EU position is decline in both imports and exports.
However, before any Leave campainers start crowing, it is clear that our EU trade partners are still a very large part of our underlying economy. There are 7 countries I have classified as large of medium for the EU, and these countries make up more than a third of UK exports.
Also, the trade between Non EU countries (e.g. USA) and the UK is based on the current trade agreements with the EU. So the UK would need to renegotiate these deals with Non EU countries.
What would happen if… If trade between UK and EU fell by 1% due to an exit from the EU, this would mean a reduction in UK exports of £1.3bn per year. However imports from EU countries would reduce by £2.2bn over the course of a year. Both EU and UK economies would be impacted by this.
Going back to my football analogy, I’ll award a goal to Leave given that they have 2 absolutely huge trade partners that are growing strongly, that are not in the EU (USA and China). However Remain equalise by the fact that the trade with these 2 partners are based on current EU deals, so require future negotiation.
Final score by my reckoning is 2 – 2. For me, the economic argument is not clearly supporting either Leave or Remain. Both have evidence in the numbers supporting their claims, but neither side have a crystal ball. Take anything the politicians say with a massive pinch of salt. Also, take anything the economists say with a slightly smaller, but equally salty pinch of salt. Economists are great at doing long term predictions, but often their predictions are out of date by the time the ink has dried…
How should I vote?
Really, the economic argument comes down to a number of factors. How you feel about those factors will drive your decision.
Do you fear economic instability? If so, probably best to vote Remain, as the result of this vote is certainly more certain – as nothing really will change as a result.
Do you believe that UK can continue to trade with all countries, if we leave the EU? If you believe this, then you voting Leave makes sense
Would you rather focus UK efforts on trade with Non EU (given the growth and size of market)? If so, vote Leave.
Do you see the large number of EU imports as vital for the economy? If you believe this, then you are probably leaning toward Remain.
Ultimately, the way you vote will be swayed by a number of arguments and factors. You have a great chance to ensure that your voice is heard, so make sure that you get out there and vote!
I hope that you have found this at least a little helpful in making your decision. If you liked this, please ensure that you share on Social Media, to make sure others get the chance to review this information before making a decision.
As a management accountant or finance professional a core skill is forecasting and budgeting. My mini-series offers tips and tricks to help you improve your skills in this area.
We’re on step 3 here, if you want a recap of the other steps, click here.
Today I want to talk about the importance of assumptions, and your flexibility of working with them.
The importance of assumptions
Budgeting is a process that creates a financial plan. This plan is based on future events that are not 100% certain.
So this makes budgeting ambiguous. Over the years I’ve seen many approaches to dealing with this ambiguity, from rolling forward last years results, to bottom up forecasting from numerous business partners, but the successful attempts have always been based on clear assumptions.
And I mean super-clear.
E.g. I am assuming that we will have an identical mix of customer types next year, with 10% growth.
As long as you’ve made this clear then people can get behind the assumptions, or not, but at least they will understand what they are looking at…
Get your assumptions signed off
Are you the ultimate business owner of the profit or cost you are budget in for? As a finance professional, I doubt it. Therefore, you need to make sure whoever is on the hook for the budget delivery has agreed to the final figures.
Organise a sign off meeting with the ultimate owner, plus your FD, and present your super-clear assumptions. Agree the budget in the meeting, and decide on any follow up actions.
How to test that your assumptions are good enough
This is quite easy.
You’ve been in budget sign off meetings and felt that sinking feeling as your FD rips apart your 3 months of work, right? He/she does this by asking questions like:
Why is income up 200%? Why has your rental is Spanish properties gone from £100k to £0?
The best way to test assumptions in a budget is to print off the P&L, then leave it overnight. Come back the next day with fresh eyes and imagine you wanted to pick holes in the numbers.
What questions would you ask? Do you like the answers? If not then I suggest you have another look at what you’ve assumed.
Your budget is only as good as the assumptions you make. Make them clear, get them signed off, and test them for robustness.
Budgeting is all about managing expectations, so it’s probably no great surprise that communication is a major tool is delivering an awesome budget.
We previously looked at timelines in a previous post, also you read my intro to this series here.
How are your communication skills? You need to find your answers to the following questions:
Who is your key audience?
Who are the stakeholders you need to engage? Remember that each stakeholder may need their own approach.
For example, in my business I have
Each of these groups have different communication needs. I’m in finance, so the finance leaders want me to demonstrate that I’m on top of the budgeting process. Regular, top level updates with key risks and opps keep them happy.
Business leaders want to challenge the division to deliver more than last year, with stretching targets. They need to understand what level of challenge has been embedded in the numbers.
So you can clearly see how different requirements of your audience will drive different types of communication.
Understanding who needs to be communicated to and ensuring you have a plan to meet their needs will really help you stand out as a talented communicator (and budgeter).
Don’t use Excel as a presentation tool
A good tool for presenting a budget is powerpoint. If you’re already using powerpoint then skip to the next section.
Now if you’re using excel to present your budget then it might be time to think about an alternative approach.
Don’t get me wrong – Excel is very good and I use it loads, however I never (ever) use it to communicate with. Why? Because it makes you think in tables, and makes you talk about numbers rather than assumptions and initiatives.
Using powerpoint is great for communicating. It’s a ready made storyboard. I map out the skeleton of my budget pack first – even before I’ve VLOOKUPPED anything.
I hope you’ve found the tips helpful, come back next time to find out about Xxx
This post is focussing in on timelines as an important factor in a successful budget approach.
Budgeting occurs once a year, but you don’t magic up a load of spare time in which to complete the task. Your day job will be churning along in the background. Sometimes it’s quite hard to manage the two processes in parallel.
So to be successful you need an effective roadmap. You need to know when the deadlines are, so you can plan the milestones in. Budgeting is an iterative process, so you need to allow plenty of time to make the changes that you’ve agreed along the way.
Create a budget planner in Excel and to help you. Plot in the final deadlines, and then map back from there. Key milestones will likely be:
Initial scoping meeting – agree timelines, any new business initiatives etc
Assumptions sign off – with the relevant P&L owner
Progress reviews – at least 2 of these
Final sign off – at this point the P&L owner is signing up to delivering the numbers
Seem like a lot of steps? Perhaps, but if you’re new to this, run this milestone plan past your boss. They’ll soon tell you if it’s over/under kill. As I said earlier, allow yourself as much time as possible between each step to do the work (modelling/analysing/story boarding).
Book meetings in the diaries for all if the above milestones. Do this at the very beginning of the process. Not only will this focus your mind, but you will also find out if everyone is available on your chosen dates. Trust me, finding out your MD not available to sign off his/her budget is not cool, and doesn’t reflect well on you…
A good timeline will allow you to manage the process effectively, making you appear unruffled, professional and in control.
As a finance manager I’ve done my fair share of budgeting. If you are new to the process then this blog series should be a great starting point.
Every organisation budgets slightly differently, but broadly speaking this is an annual event that will be linked to company projections and performance based pay. Therefore they are important, and often quite emotive.
In order to budget well you need to focus on the following three elements:
Are you starting a new job soon? Congratulations! If you want to get the most out of the transition make sure you don’t…
Avoid stupid questions
We’ve all asked them before right? “Er, where’s the loo?” or “How do you open the gates using your pass?” It’s never a nice feeling, but it’s absolutely key to your success.
For the first few days, weeks or months you have a unique opportunity where nobody is expecting much from you. In this period people don’t mind stupid questions. Fast-forward a year – asking stupid questions goes down less well.
This is your chance to question what you see and hear, and get honest and open answers from all around you. Ask anything you like, anything you’re curious about – but make sure you note the answer down. Stupid questions are not stupid questions the second time round, just annoying questions.
The best way to ask a stupid question is to start the sentence with something like “Can I ask you a stupid question?” People can’t really say no to this, and then you’ve set their expectations.
By asking stupid questions you appear keen to learn and modest enough to admit you don’t know everything – great characteristics that I look for in my team. What’s the most stupid question you’ve ever asked at work?
If you set a NYR that is “get fit”, or “give up smoking”, what does this mean? It’s very hard to know if you’re achieving your goals or not. Motivation is reduced, engagement drops and hey presto! You quit.
Rather than choosing a NYR like “get fit”, make it more like: “Go to the gym once a week, doing cardio and weights for two months, with a plan to increase this once I’m used to it”. I don’t know about you, but I prefer this kind of objective and find it much easier to keep.
Making your resolutions realistic, and giving yourself a time target is a good move – making your NYRs easier to track and you can understand whether you are achieving your objectives.
Make sure you set resolutions that meet the SMART criteria, and I promise you will find them easier to keep! What are your NYRs? Comment below and let me know!
So it’s time for some New Years resolutions (NYRs) as we welcome in a new year. Are you one of those people that are rubbish at sticking to your NYRs? Perhaps you…
Don’t have a long term plan
Why do you make NYRs? To improve your life. Giving up smoking, going to the gym more, networking more in the office; all these NYRs are chosen because they will make you a better person.
A long term plan is great because it forces you to think about what you want to achieve and gives you focus and direction. Setting NYRs without such a plan means you are thinking short term, and this limits your engagement in your goal. Less engagement means less commitment, and voila, you have just sacked off yet another crappy attempt at keeping a NYR.
So make a long term plan. January is a great month to review what you achieved last year, and to think about where you want to be in the future. I’ve blogged about 5 year plans and 1 year plans if you want some further thoughts. Hope you have a great year!