Close to half of UK’s FTSE 350 ‘damaged’ by Brexit – Financial Times

Almost half of FTSE 350 companies described post-Brexit trading arrangements with the EU as “damaging” but nearly all remained optimistic about their own prospects and the wider economic outlook, according to an analysis backed by the Financial Times.

Other issues raised by respondents to the latest FTSE 350 Boardroom Bellwether survey included challenges on executive hiring due to pandemic-related pressure to restrain pay and slow progress in adopting net zero carbon strategies.

Twice as many FTSE 250 companies felt that there had been some damage from Brexit compared to those in the FTSE 100, showing that the impact has been felt most keenly by more domestically focused smaller businesses rather than the large international groups that typically occupy the top tier of the stock market.

The impact of the new UK-EU trading relationship highlighted the importance of unrestricted global trade and free movement of labour for many businesses. “Companies have been affected in a number of ways,” said Peter Swabey, policy director at the Chartered Governance Institute, which carried out the survey with the FT of company secretaries’ views.

He pointed to “increased costs of materials, delays on lead times, additional procedural requirements, haulage issues, delays at [ports] and restrictions on freedom of movement.”

Nevertheless, nearly all respondents predicted there would be a significant improvement to global economic conditions over the next 12 months, despite continued uncertainty about the coronavirus pandemic. About four in five were positive on the UK economy as well as their specific industry’s prospects.

More than half said that they would increase capital expenditure, up from 43 per cent in the last survey conducted in 2019 before it was put on hold last year because of the pandemic, while only 6 per cent anticipated a reduction.

Companies also raised concerns about growing scrutiny from investors and regulators over executive pay. More than half said it was having a detrimental effect on their ability to hire the best candidates for board and senior management positions.

Almost all companies said that they now considered the pandemic when debating the level of executive pay. But that also meant that it had become harder to compete for the best candidates with higher pay on offer from privately owned companies — especially those backed by private equity — as well as from businesses outside the UK, especially the US.

The survey also found that companies continued to focus on improving corporate governance. Almost half of FTSE 350 favoured having the workforce represented on the board by a designated non-executive director.

Despite the pressure from government in the run-up to hosting the UN’s COP26 climate summit, the survey found many boards had yet to define their environmental objectives. Only two-thirds of FTSE 350 respondents had published plans to tackle climate change with half stating they had made a commitment to achieve net zero emissions within the business.

The majority of those with environmental strategies were FTSE 100 companies, with 80 per cent of respondents, without one coming from the ranks of the FTSE 250.

The boardroom survey also found that nine in 10 FTSE 350 companies were planning to make changes to office-based working as a result of the pandemic. A third of respondents said that productivity had increased in the past year as many employees worked from home, although 10 per cent warned it had fallen.

source: Close to half of UK’s FTSE 350 ‘damaged’ by Brexit – Financial Times

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