FTSE boards are firmly committed to remaining in the UK, despite the vote to leave the European Union, but remain deeply pessimistic about the economy, according to new research.

In a survey of FTSE 350 companies, 72% of respondents are expecting economic conditions to deteriorate, with confidence in the UK economy at its lowest since 2012.

The biannual FT-ICA Boardroom Bellwether survey, which canvasses the views of the FTSE 350 on the external environment as well as key governance issues such as board diversity, regulation, risk and compliance, found Boards are particularly gloomy about UK economic prospects for the next year with just 8% predicting an improvement – down from 13% in May 2016, 40% in December 2015 and 74% in July 2015.

Those anticipating a decline have tripled from 24% in May to 72% in December, a major leap from just 11% in December 2015.

Only 16% of respondents anticipate an improvement in global economic conditions in the next year, unchanged from May 2016, but down from 28% in December 2015, 33% in December 2014 and substantially down against the 57% of July 2015.

More than half (59%) of respondents rate Brexit as potentially damaging to their business. Despite this, only 1% of respondents are considering moving their head office from the UK to somewhere in the EU, whilst 92% are not, and less than half (43%) see Brexit as a principal risk.

Peter Swabey, policy and research director at ICSA: The Governance Institute said: "Now that Brexit is a reality, we are seeing a return to caution. The FTSE 250 are marginally more positive about Brexit than the FTSE 100, with 13% of FTSE 250 respondents viewing Brexit as positive compared to 3% of the FTSE 100.

"This makes sense as the FTSE 100 is more geared towards international trade where Brexit will likely have a greater impact, but it remains to be seen how sentiment will change across the board the closer we get to triggering Article 50."

The survey also revealed the number of companies rating their boards as ethnically diverse has dropped to 22% from 25% in December 2015 and 34% in May 2016.

Mr. Swabey added: "We expect ethnic diversity to receive greater attention now that Sir John Parker’s report has been published for consultation. There is much more that needs to be done to encourage wider ethnic and cultural diversity so that UK companies can become more open, inclusive and representative."

Board composition

The survey also found just 52% of respondents feel their company’s executive pipeline is sufficient to provide a sustainable pool of talented and diverse board members, down from 56% in May.

According to David Isaac, Chair of the Equality and Human Rights Commission, building board skills is vital to ensure diverse talent is developed to take on board roles, particularly if process towards equality is slow.

He added: "It is disappointing that many companies believe their talent pipelines aren’t improving. This should be a wake-up call to all businesses to nurture and develop new talent. Unless they do so we will never deliver on our collective ambition to make our boards diverse."

Sixty three per cent report that their boards are diverse in terms of gender, down slightly from 67% in May 2016, 68% in December 2015 and 69% in December 2014. Nearly a third (28%) of FTSE 350 respondents have achieved less than 20% representation on boards, with 40% of FTSE 250 companies admitting to being below 20%.

The lack of progress is connected to the effectiveness of the female executive pipeline. The Hampton/Alexander Review, which calls for the number of women executive committee members to increase to one-third by 2020, reinforces this.

Rowena Ironside, Chair, Women on Boards UK Ltd said: "The challenge laid down by the Hampton/Alexander Review, to set targets for better gender balance in senior executive teams, is a welcome next step after the success of the Lord Davies Review targets.

"Improving gender balance in the executive pipeline will be a more difficult endeavour with a longer time horizon than adding more female non-executive directors to boards. However, this focus on the talent within organisations will reinforce the progress made in the boardroom, by forcing boards to understand and address the organisational barriers and stereotypes that continue to limit women’s promotion opportunities.

Concerns for cyber security

Additionally, the report highlighted cyber risk as a primary concern, with 80% of respondents rating the risk as increasing, followed by social media risk (52%) and reputational risk (51%). Political risk, which could have included Brexit, was rated joint lowest with legal risk at 41%.

The Institute of Risk Management (IRM) expects the importance of Enterprise Risk Management to continue to grow rapidly in the years to come.

Ian Livsey, Chief Executive, IRM said: "Organisations will increasingly look to their risk professionals to lead, coach and advise on risk at a strategic level, with a greater focus on the macro risk and unknowns, and on ensuring a healthy risk culture and behaviours, and less on the micro-risks and internal processes."