London, 12 December 2016 – a survey of FTSE 350 companies out today finds boards deeply pessimistic about the economy, with 72% of respondents expecting economic conditions to deteriorate, but firmly committed to remaining in the UK despite the vote to leave the European Union.
The biannual FT-ICSA Boardroom Bellwether survey, which canvasses the views of the FTSE 350 on the external environment as well as key governance issues such as board diversity, regulation, risk and compliance found the following:
- UK economy: Confidence is at its lowest since the surveys began in 2012. Only 8% of respondents anticipate an improvement in the next twelve months, down from 40% in December 2015
- Global economy: Confidence is also very low with just 16% of respondents (unchanged from May 2016) anticipating an improvement in the next twelve months
- Brexit: 59% rate Brexit as potentially damaging to their business, yet less than half (43%) see it as a principal risk. Only 1% of respondents are considering moving their head office from the UK to somewhere in the EU (92% are not)
- Boardroom diversity: Gender and ethnic diversity are down; worker representation on boards is unpopular (85% of respondents are against it)
- Risk: Cyber risk remains the top risk for companies.
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 just 8% predicting an improvement – down from 13% in May 2016, 40% in December 2015 and 74% in July 2015. Those anticipating a decline have tripled from 24% in May to 72% in December, a major leap from just 11% in December 2015.
- Global economy: Only 16% of respondents anticipate an improvement in global economic conditions in the next year, unchanged from May 2016, but down from 28% in December 2015, 33% in December 2014 and substantially down against the 57% of July 2015.
- Brexit: 59% of respondents indicate that leaving the EU would cause some or significant damage (54% and 5% respectively compared to 37% and 6% in May 2016) and 32% predict no change.
‘Now that Brexit is a reality, we are seeing a return to caution. The FTSE 250 are marginally more positive about Brexit than the FTSE 100, with 13% of FTSE 250 respondents viewing Brexit as positive compared to 3% of the FTSE 100. This makes sense as the FTSE 100 is more geared towards international trade where Brexit will likely have a greater impact, but it remains to be seen how sentiment will change across the board the closer we get to triggering Article 50,’ says Peter Swabey, Policy and Research Director at ICSA: The Governance Institute.
The key governance findings include:
- Board composition: Just 52% of respondents feel their company’s executive pipeline is sufficient to provide a sustainable pool of talented and diverse board members, down from 56% in May.
‘Building up board skills is vital to ensure diverse talent is developed to take on board roles - especially if progress towards equality is slow. It is disappointing that many companies believe their talent pipelines aren’t improving. This should be a wake-up call to all businesses to nurture and develop new talent. Unless they do so we will never deliver on our collective ambition to make our boards diverse.’ (David Isaac, Chair of the Equality and Human Rights Commission)
- Ethnic diversity: The number of companies rating their boards as ethnically diverse has dropped to 22% from 25% in December 2015 and 34% in May 2016.
‘We expect ethnic diversity to receive greater attention now that Sir John Parker’s report has been published for consultation,’ says Peter Swabey. ‘There is much more that needs to be done to encourage wider ethnic and cultural diversity so that UK companies can become more open, inclusive and representative.’ - Gender diversity: 63% report that their boards are diverse in terms of gender, down slightly from 67% in May 2016, 68% in December 2015 and 69% in December 2014. 28% of FTSE 350 respondents have achieved less than 20% representation on boards, with 40% of FTSE 250 companies admitting to being below 20%. The lack of progress is connected to the effectiveness of the female executive pipeline. The Hampton/Alexander Review, which calls for the number of women executive committee members to increase to one-third by 2020, reinforces this.
‘The challenge laid down by the Hampton/Alexander Review, to set targets for better gender balance in senior executive teams, is a welcome next step after the success of the Lord Davies Review targets. Improving gender balance in the executive pipeline will be a more difficult endeavour with a longer time horizon than adding more female non-executive directors to boards. However, this focus on the talent within organisations will reinforce the progress made in the boardroom, by forcing boards to understand and address the organisational barriers and stereotypes that continue to limit women’s promotion opportunities.’ (Rowena Ironside, Chair, Women on Boards UK Ltd) - Risk: Cyber risk is the primary concern, with 80% of respondents rating the risk as increasing, followed by social media risk (52%) and reputational risk (51%). Political risk, which could have included Brexit, was rated joint lowest with legal risk at 41%. The Institute of Risk Management (IRM) expects the importance of Enterprise Risk Management to continue to grow rapidly in the years to come.
‘Organisations will increasingly look to their risk professionals to lead, coach and advise on risk at a strategic level, with a greater focus on the macro risk and unknowns, and on ensuring a healthy risk culture and behaviours, and less on the micro-risks and internal processes.’ (Ian Livsey, Chief Executive, IRM)
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For further information, please contact Maria Brookes, Media Relations Manager:
mbrookes@icsa.org.uk
+44 (0)20 7612 7072
+44 (0)7890 649 143
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.
Website: www.icsa.org.uk - The Financial Times is one of the world’s leading business news organisations, 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 810,000. Mobile is an increasingly important channel for the FT, driving more than half of total traffic.
Website: www.ft.com - The Winter 2016 FT-ICSA Boardroom Bellwether report can be viewed in full at www.icsa.org.uk/bellwether
