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Law for Business

Knowhow - guidance - precedents

22 JAN 2014

What do UK companies think about business in the UK?

Is it all good; or is it all bad; or is it, as is usually the case, a mix of good and bad? We are, of course, British and so probably are more reserved that some other nations, but the new FT-ICSA Boardroom Bellweather Report (www.icsa.org.uk/bellweather) would suggest that there is a more positive feel by UK business about UK business as we go into the New Year.

The twice-yearly survey by the FT and ICSA canvasses the views of company secretaries of the companies making up the FTSE350, in this case as at November 2013, and the responses generally support a view of more confidence in the UK economy; an increasingly positive view of the impact of EU membership; an expectation that capex will increase over the coming year; and a feeling that shareholder engagement is improving.

The "feeling better" factor is not quite a full blown "feel good" factor due to the view that there is still considered to be a level of public concern over remuneration packages of senior Executives and an increasing concern over Cyber risk.

When asked about their perception of the economic outlook, 60% of respondents considered that there was an improvement in Global economic conditions (5% considered there had been a decline) but as regards UK economic conditions, 80% considered there had been an improvement (only 2% a decline) supporting the general consensus of improvement in the perception of the economy and outlook. Interestingly, 67% of respondents did not consider a positive vote on Scottish Independence would impact on their business at all, with only 13% anticipating any detrimental effect (perhaps they are the ones with larger operations in Scotland).

In terms of the impact of EU membership on business, 42% felt it was positive to their business, which is a significant increase from the 21% positive response in the previous survey in July 2013. 15% considered EU membership was detrimental to their business (bearing in mind these are FTSE350 companies). Support for or against a referendum on EU membership was roughly divided equally between respondents. However the current Government received a reasonably positive endorsement compared to previous surveys, with 35% considering the UK Government to be "business-friendly" and 17% considering them not to be so; a significant portion considered them neutral. The Opposition fared badly in this area with only 2% of respondents considering them "business-friendly" and a huge 67% considering them not to be so.

Despite an improvement in the perception of Shareholder engagement, the new remuneration guidelines appear to have done little to help regain public confidence in Executive pay. 76% of respondents felt that public concerns would continue and many were considering changes to pay structures to try and address this. Proposed changes included a review of overall levels of remuneration (31%); a simplification of the remuneration model (36%); and a deferment of a larger portion of pay over a longer time period (35%).

Cyber risk continues to be perceived as a significant threat to companies with 76% of respondents considering the risk had increased. However there has also been an increase in the number of companies viewing themselves as successfully identifying and dealing with Cyber risk, now at 31% of respondents (compared to 21% in July 2013).

So the perception of UK business is more positive, at least on the basis of the FT-ICSA survey responses. The continuation of low interest rates, slight improvement in manufacturing output and the availability of finance hopefully will see a continued improvement in both UK business and their perceptions of the economy through 2014.

Kate Anthony Wilkinson

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