Polling shows increasing government regulation is damaging commercial confidence more than the prospect of Brexit, which leaves businesses feeling “indifferent”.
The surprise conclusion on Brexit, which contradicts the opinion of European Union (EU) cheerleaders like international bankers, big business representatives and pro-EU lobbyists at the Confederation of British Industry, was revealed in a FTSE 350 poll conducted by the Institute of Chartered Secretaries and Administrators (ICSA).
The Summer 2016 edition of the biannual FT-ICSA Boardroom Bellwether survey published today canvasses FTSE 350 views on the external environment and key governance issues such as board diversity, regulation, corporate culture and risk.
Illustrating the respondents’ indifference to Brexit, only 43 per cent of them rate Brexit as potentially damaging, and and only 49 per cent of boards have even considered the implications of leaving the EU at some point after the UK’s June referendum.
Evidencing other concerns for respondents, business confidence in the UK economy was found to be at its lowest since the surveys began in 2012, with just 13 per cent anticipating an improvement in the next twelve months. The global economy fared little better, with only 16 per cent expecting improvements on that front.
The 13 per cent figure shows a very sharp decline from 40 per cent anticipating improvement in the UK economy in December 2015, and from 74 per cent in July last year. Respondents anticipating further decline have more than doubled from 11 per cent to 24 per cent, with a further 24 per cent saying their response depends on the outcome of the EU referendum.
Looking at the global economy, a mere 16 per cent of respondents anticipate improvement in global economic conditions in the next year, down from 28 per cent in December 2015 and 57 per cent last July.
In contrast to what the EU referendum Remain campaign claims, perceptions of EU benefits to the UK have also taken a substantial hit, with only 37 per cent of companies regarding membership of the politico-trading bloc as having a positive effect on their business — a massive reduction from the 61 per cent figure in December 2015.
The results on this front expose a division among businesses. Respondents representing FTSE 100 companies rate EU membership more favourably than those from the FTSE 250.
55 per cent of FTSE 100 companies believe the EU has a positive impact, but the same view is only found in 24 per cent of respondents from the FTSE 250.
The division is even more stark in those businesses wishing to put pin their colours to the mast and actively campaign in the referendum, with proportionally five times as many FTSE 100 companies supporting Remain campaigns than FTSE 250 ones.
The greatest corporate governance challenge concerning respondents to the Barometer was in fact over-regulation and “compliance for compliance’s sake” — specifically how they can manage effective risk management without stifling growth.
Respondents expressing considerable frustration with extensive new regulation and legislation perceive that continuing pressure on boards to focus on risk management prioritises process over performance and strategy.
The results of the survey reinforce recent comments about regulation and the EU from Brexit campaigner John Longworth — the former director of the British Chambers of Commerce forced to resign after calling for the UK to vote Leave — when he said:
“There is no area of Britain’s EU membership that has over-promised and under-delivered quite as badly as the single market.
“Instead of being the great engine of trade it was promoted as when it was launched in 1980s, it is now at best a mirage and at worst a source of stifling regulation that holds British back businesses at home and makes them less competitive in the world markets.”