The Boardroom Bellwether research, in association with the Financial Times, is a biannual survey which canvasses the views of the FTSE 350 on both the external environment and key governance issues.

This summer’s findings show confidence in the economy is at its lowest since the surveys began in 2012. Only 5% of respondents anticipate an improvement in the next twelve months, down from 8% in winter 2016 and 13% a year ago. Over two thirds (69%) of respondents predict a decline, a big increase on 24% in summer 2016 and only marginally lower than the 72% reported in winter 2016 after the referendum.

Half (54%) of the FTSE 350 now rate a UK exit from Europe as potentially damaging, up from 45% in summer 2016 when the survey was carried out immediately before the EU Referendum vote. However, the survey suggests some confidence is returning to the FTSE 100, with 44% now thinking that there will be some or significant damage to their business, down from the two-thirds who thought so in 2016.

In contrast, the FTSE 250 is feeling more nervous with nearly two-thirds, up considerably on the 26% in summer 2016, expecting some or significant damage.

Overall, worries about political risk have increased considerably compared with previous surveys. Two-thirds (66%) of respondents now rate political risk as increasing, up from 41% in winter 2016 and well ahead of reputation risk (56%), social media risk (54%) and legal risk (42%).

Peter Swabey, policy and research director at ICSA, said: ‘Given the political and economic roller coaster of the first six months of the year, it is hardly surprising to find that boards in this survey remain pessimistic about prospects for growth over the next 12 months.

‘Declining business confidence linked to slowing economic growth is reflected in the 44% of respondents declaring no change in plans for capital expenditure in the next twelve months. It will be interesting to see whether this situation changes once uncertainty about Brexit has been removed.’

Governance

The research showed that despite the ambition to create more representative boards, progress remains slow. The survey found women still remain underrepresented at senior level generally in the FTSE 250, even though high-profile initiatives to improve gender balance have seen the FTSE 100 appoint women to all boards.

Attempts to improve other measures of diversity such as ethnicity, culture and wider experience are also not showing as much impact as might have been hoped. In this respect, only 53% of respondents think that their pipeline is sufficient (compared with 58% in summer 2016) and 41% report that their pipeline may not meet their needs compared with 36% this time last year.

ICSA described responses as to how companies plan to address the problem as ‘surprisingly vague’. Plans to tackle the female pipeline are better established, but 61% of respondents think that their female pipeline is not sufficient, with only 27% confident that it is.

Cyber worries (85%) top the list of concerns as regards risk management, up from 80% in winter 2016. The frequency with which boards are reviewing their assets and exposure reflects this growing concern with two-thirds reviewing their exposure at least every six months, up from 52% in summer 2016.

In addition, most (91%) of respondents have reviewed and discussed their supply chain risks, including their exposure to slavery and corruption issues, a significant increase on 56% in summer 2016. Two-thirds of respondents this time believe they have been successful in mitigating the risk, compared with 16% a year ago.

Overall, the research indicated a general feeling that the UK corporate governance code is fit for purpose and overwhelming support to retain a principles-based approach. The requirement for employee representation on boards and/or remuneration committees was singled out as the least popular new proposal, along with the possibility of an annual binding vote on pay.

The ICSA/FT Boardroom Bellweather reports are here.