London, 23 May 2016 – a survey of FTSE 350 companies out today finds boards in pessimistic mood about the economy, indifferent to Brexit and frustrated about the tide of new regulation and legislation.
The biannual FT-ICSA Boardroom Bellwether survey, which canvasses the views of the FTSE 350 on the external environment and key governance issues such as board diversity, regulation, corporate culture and risk, found the following:
- UK economy: Confidence is at its lowest since the surveys began in 2012. Only 13% of respondents anticipate an improvement in the next twelve months
- Global economy: Confidence is also very low with just 16% of respondents anticipating an improvement in the next twelve months
- Brexit: Fewer than half the respondents (43%) rate a UK exit from Europe as potentially damaging and barely half (49%) of boards have considered the implications of the UK leaving the EU
- Risk and regulation: There is a perception that the continuing pressure on boards to focus on risk management is prioritising process over performance and strategy, and there is considerable frustration arising from the tide of new regulation and legislation.
The main economic and political findings of the survey are:
- UK economy: Boards are particularly gloomy about UK economic prospects for the next year with only 13% predicting an improvement – down from 40% in December 2015 and 74% in July 2015. Those anticipating further decline have doubled from 11% to 24%, and 24% feel the position will depend out the outcome of the EU referendum
- Global economy: Only 16% of respondents anticipate any improvement in global economic conditions in the next year, lower than the 28% who predicted improvement in December 2015 and substantially down against the 57% of July 2015.
‘Declining business confidence linked to slowing economic growth is reflected in the 45% of respondents declaring no change in plans for capital expenditure in the next twelve months,’ says Peter Swabey, Policy and Research Director at ICSA: The Governance Institute. ‘It will be interesting to see whether this situation changes once uncertainty about Brexit has been removed.’
- Brexit: Just over a third (37%) of companies regard EU membership as having a positive effect on their business, substantially down from 61% in December 2015 – although respondents from the FTSE 100 seem to view EU membership more favourably than the 250. More than twice as many (55%) of FTSE 100 companies feel that EU membership has a positive impact compared with 24% of the FTSE 250. As in previous surveys most boards are reluctant to get involved with the debate. Of those who had supported a campaign in this sample, 24% were from FTSE 100 companies and 5% were from the FTSE 250 – all supporting campaigns to remain.
The key governance findings include:
- Governance concerns: Over-regulation and compliance for compliance’s sake have been identified as the greatest corporate governance issues. In particular, achieving effective risk management without stifling growth is a major challenge
- Boardroom diversity: Around two-thirds (67%) of boards consider themselves to be diverse, with FTSE 100 companies performing better than FTSE 250 – unsurprising given the typical size difference and the pressure on gender diversity from the target set by the Davies Review. Progress is still being made on gender diversity and there is a small improvement in the pipeline of potential female board members (28% view it as sufficient versus 18% in December 2015). Ethnic diversity is up to 34% from 25% in December 2015 and 23% in July 2015
- Risk: Cyber risk is the top concern (82%), followed by reputational risk (70%) and social media risk (66%). Surprisingly, political risk, which could have included Brexit, was rated lowest (42%).
- Corporate culture, behaviour and trust: 82% of companies are actively addressing culture and behaviour on the board, compared with 63% in December 2015, and 75% of boards are addressing culture and behaviour in the wider organisation.
‘It is encouraging to see an increase in the number of companies addressing culture and behaviour, particularly on the board. However, answers to our question about building public trust were disappointing, revealing a rather formulaic approach and a lack of innovative thought,’ says Peter Swabey.
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Notes to Editors:
- ICSA: The Governance Institute is the professional body for governance. We have members in all sectors and are required by our Royal Charter to lead ‘effective governance and efficient administration of commerce, industry and public affairs’. With 125 years’ experience, we work with regulators and policy makers to champion high standards of governance and provide qualifications, training and guidance.
- The Financial Times, one of the world’s leading business news organisations, is recognised internationally for its authority, integrity and accuracy. Providing essential news, comment, data and analysis for the global business community, the FT has a combined paid print and digital circulation of 780,000. Mobile is an increasingly important channel for the FT, driving almost half of total traffic.
- The full report will be available to download on 23 May at www.icsa.org.uk/bellwether