Planning a 3-year budget for long-term sustainability

Historically, we have started to think about our budgets for the next financial year of the Institution in the autumn, but this year we are going to do things differently.

As we look to implement our new strategy of becoming a “global, inclusive and digitally enabled engineering community,” and as we continue our deliberations around the future of our headquarters building, it is no longer viable just to consider the annual budgeting process as a one-off activity as we have in the past. So this year we are looking to develop a three-year budget where the first year will be fixed, the second year will have a degree of flexibility to accommodate changing circumstances and the third year will be indicative. 

The focus of this three-year plan is to ensure the Institution has sustainable finances during a period of significant transition, not least the implementation of our strategy, market testing the potential to divest our trading companies, and the uncertainty surrounding the future of the HQ building. 

Ultimately, I want to get to a position where we can have confidence in a five-year budget, which will allow us to plan much more effectively for the future.

It is important that as we move forward our financial information is more easily accessible to our membership and much more transparent, and the finance board is working with the council to ensure that this is the case.

For me it is key that we generate the funding needed for the implementation of our digital strategy while at the same time ensuring that more funding is available for our membership networks, which we recognise have been significantly affected in recent years. In the past few years, we have had a small decrease in our paying membership which, coupled with below-inflation fee increases, has contributed to these budget constraints for our member networks. We believe that by addressing this issue, by controlling our costs and by ensuring that the quality of our offerings is second to none, we will be able to re-establish the levels of investment we desire in our divisions, groups, boards and committees.

We have also had a period of significant underinvestment in our headquarters building which is in a large part driving the need to do something different, and something that can never again be allowed to happen. Over the next three years we will be looking to increase our reserves for investment in our infrastructure and to give a degree of security for our long-term future.

It would be remiss of me not to mention the sterling work of the pension fund trustees and their pension advisers, ably led by our past-president Isobel Pollock-Hulf. During a prolonged period of great uncertainty in the investment market, our pension fund is now 106% of liabilities, giving us a strongly positive position going forwards.

We have seen the positive motivational impact of our new strategy, both for members and the employees of the Institution, and people are asking me: “what will be your focus for your presidential year?” First and foremost, it will be to continue to drive forward our new strategy, but more than that I want to be confident that the Institution is in a strong financial position for the years ahead. 

I am also passionate about the role of engineering and manufacturing in our society, and I will use my year to reinforce our importance with government, regional, national and international, and the need to invest in our future both in terms of manufacturing and infrastructure, and by addressing the skills gap that is so prevalent across the engineering profession.