A survey of FTSE 350 companies finds just 2% of respondents predicting an improvement in UK economic conditions as concerns about the impact of Brexit start to hit home, with 73% predicting damage to their company as a direct result of the EU exit scenario. The latest Boardroom Bellwether Survey conducted by ICSA: The Governance Institute in association with The Financial Times also reveals concerns about the global economy.
The key findings of the Winter 2018 survey – which canvasses the detailed and thought-provoking views of the FTSE 350 on the business environment and key corporate governance issues such as Board diversity, regulation, risk and compliance – concentrate on the two main areas of the business environment and corporate governance.
• UK economy: Expectations of UK economic conditions have declined sharply compared to the last survey, which took place in the summer of 2018. Then, 55% of respondents expected a decline, but now 81% predict a decline and just 2% any improvement – the lowest level since the surveys began back in 2012
• Global economy: Confidence in the global economy has taken a sharp turn for the worse, with just 11% of respondents predicting an improvement over the next 12 months. This figure is down from 25% in the summer 2018 survey. 22% consider that conditions will be unchanged (down from 42%) and 56% that they will decline, the latter representing a sharp increase from 24% from August.
“The global business environment is becoming more challenging as the reality of a trade war has started to sink in. Global trade growth suffered from the tariff impositions and the uncertainty this generated” (Dr Brian Hilliard, chief UK economist, Société Générale Corporate & Investment Banking)
• Brexit: 73% of respondents predict damage to their company as a result of Brexit compared with less than half (42%) in the summer of 2018. Unsurprisingly, there has been a sharp rise in the number of companies now reporting Brexit as a principal risk (56%, up from 39% in summer 2018), although just 28% of companies are increasing inventory in the UK to prepare for a no-deal Brexit outcome.
“It seems confidence that the UK would be able to negotiate a deal with the EU that would at least allow a ‘break even’ position has evaporated. 59% of companies admitted to preparing for a no-deal scenario when the survey was conducted in December. Given recent political events, one might now expect that number to have increased” (Peter Swabey, policy and research director, ICSA: The Governance Institute)
• Business-friendliness: The Government is still seen as significantly more business-friendly than the opposition (35% as opposed to 4%), but it has not yet recovered to the 54% rate seen in summer 2014 and winter 2015.
“The political rhetoric of recent years that has encapsulated the public lack of trust in business seems to have produced an own goal for the main UK political parties, with neither side now seen as being particularly business friendly” (Peter Swabey)