Financial journalism

Professor Steve Schifferes: Government figures provide 'considerable scope for confusion or spin'

Credit: by Jorge Franganillo on Flickr. Some rights reserved.

Whatever your beat as a journalist, it is likely that you will at some stage be faced with making sense of a financial statement, reporting on the annual budget or tasked with writing a story related to the current financial crisis.

This guide offers advice on tackling financial stories with thoughts on terminology used to describe trends.

It follows on from this guide how to correctly report numbers in the news and this podcast on using numbers in journalism.

Professor Steve Schifferes, course director on the new MA in financial journalism at City University and previously economics correspondent for BBC News Online, shares tips that all journalists can benefit from.

"It's not just financial journalists that have to understand numbers, it's something all journalists have to do," he told "It's acutely important for financial and business journalists as that really is their bread and butter."

We are going to try and an make figures and numbers be your friendProfessor Steve Schifferes
"We are going to try and make figures and numbers be your friend", Schifferes tells his students, "rather than something that you are scared about, as some journalists are".

Numeracy class

Schifferes provides City students with lessons in numeracy.

"There are three big issues that come up when we try and teach numeracy for financial journalism," he said.

1. Get a sense of scale

It is important to "get a better sense of the scale of numbers, particularly in financial journalism in the current crisis".

"People really need to understand the difference between what would be the size, say, of the national debt in billions or trillions, what would be the size of company profits, what would be the size of debts and deficits.

"Unless journalists get this instinctively, they are going to make mistakes."

He listed examples where journalists have mistaken millions for billions and billions for trillions.

2. Understand relationships

Schifferes' second piece of advice is to "understand what growth rates are, what inflation rates are, how we measure things and what different measures are".

He said it is vital to get an understanding of the relationships between numbers.

3. Beware of trends

Financial journalism trainees are also taught how to spot a trend working out when a change in numbers is a "random fluctuation".

Schifferes said that companies often report a trend, claiming that "a change in figures from one year to another represents a trend".

"It often true in economics figures that you have to look over a period of time and you have to be very careful."

"Obviously there's a news line when a number jumps, but you do have to be quite careful in understanding what is the underlying trend and what is, in a sense, a random fluctuation."

Financial reports

The majority of journalists will, at some stage, face a long financial statement.

Financial reports can be the source of stories, with reports available from Companies House for £1 or for free via a fantastic tool called Duedil (a previous tool of the week).

Professor Steve Schifferes has some advice when looking at financial reports.

1. Understand the profit

It is essential that journalists get an understanding of when a figure represents pre-tax profits and when it is reporting post-tax profits, Schifferes says.

He advises to ask yourself:
  • What they are actually including?
  • Is it pre-tax or post-tax?
  • Does it include exceptionals? For example, when companies make redundancies, they have other additional costs.
"When you are looking at profits, first of all, spot the underlying trends," he advises. "That is the most important point in terms of reporting."

2. Attention to detail

Do not just read the summary, advises Schifferes.

"When looking at the reports of big, complex companies, read the accounts in more detail to find out what's really going on."

We found in some of the financial scandals, starting with Enron, it was only in the accounts that we discovered some of these slightly dubious accounting vehicles where they hid some of their losses
"We found in some of the financial scandals, starting with Enron, it was only in the accounts that we discovered some of these slightly dubious accounting vehicles where they hid some of their losses."

Be careful when looking at headline figures, Schifferes warns, adding that "you have to be very careful of definitions."

3. Compare like with like

Compare like with like and be careful about choosing the time periods you are assessing, Schifferes says.

"It's often not a good idea to compare quarter to quarter or half year to half year results because profits and earnings vary, particularly for retail companies affected by Christmas."

Schifferes advises comparing what happened one year with the same period the previous year. "That's a much more important measure."

Share prices

Company share prices are also a source of news stories.

"In reporting results you want to look at the trends in share prices," Schifferes says.

"Look at how the company fits in with other companies. When talking about the performance of a company, it's often better to put it in the context of that sector as a whole. In some ways that's a more important measure of how successful it is."

Government figures and the budget

This is an area where there is "considerable scope for confusion or spin", Schifferes points out.

"One of the things journalists need to be most careful about is how they report on government figures, particularly at the time of the budget, when vast numbers of figures are rapidly produced by the government and everybody is expected to report on them very quickly.

"This sets out the potential for the government to put out figures which, if not misleading, are what might be called economical with the truth."

There are a number of things journalists need watch out for.

1. Inflation

Be aware of inflation. "The current government has changed the system of reporting its figures from putting the numbers in real terms, which take into account inflation, to putting the basic numbers in nominal terms, which basically don't take into account that money is going to be worth less in the future. That makes the figures look much better."

He warns that journalists can miss this which can "make the figures look more favourable".

2. Time periods

When the government produces figures on the success of a policy, be aware that that the time period reported can "dramatically change the actual effect that you are describing".

"The figures are factually correct but if you are not very careful about exactly which period has been covered, you might get a very different view."

This could be a government or opposition report stating when people are better or worse off as a result of some budget change, Schifferes suggests.

"It very much depends on what period you are covering, how far back you want to go, and whether you are including changes that have already happened but were introduced by a previous government.

"The bottom line is you have to be quite prepared in advance so that on the day of the budget you are able to pick up the things that might need correcting or adjusting or the things that there is some question mark about how they have been periodised."

It's an easy thing for journalists to get caught up in and just accept the government figures
He adds: "It's an easy thing for journalists to get caught up in and just accept the government figures. It does take a little bit of time to stand back and make sure you really understand them and get the reporting right."

Terminology and writing headlines for financial stories

When he was economics correspondent for BBC News Online, Schifferes and colleagues talked a lot about definitions, such as when the term 'financial crisis' should be used and when the word 'recession' should be favoured.

"It is a delicate issue. My view would be that you ought to describe things in a way that is accurate and you don't want to be over dramatic."

He says it can be problematic to describe a financial position as a 'recession', a 'downturn', a 'slump' or a 'slowdown'.

"It's quite tricky because what we are often describing is growth which is around zero, plus or minus half a per cent - either way the economy is quite weak.

"There's a bit of an obsession, particularly in the UK, with the idea that we can only call something a recession if there are two quarters of negative economic growth. That is technically true in some definitions but it's not an official definition and, for example, in the US there are different definitions of recession.

"I think we should be less obsessed with the technical definition of recession and more clear on what the underlying economic trend is, whether it's a slowdown, a downturn, something that is indicating the economy is dramatically growing at less than it was before. It's important that we describe that."

And there is another reason why journalists should think before they choose a particular word.

"I do think it's also important that we take care with language because it can have a certain amount of market effect," warns Schifferes.

"We don't want to be inaccurate but we must be aware of what emotion could be is attached to a particular word."

Free daily newsletter

If you like our news and feature articles, you can sign up to receive our free daily (Mon-Fri) email newsletter (mobile friendly).

Related articles