For a three week period (between 26th January and 16th February 2012) the focus of the Challenge is Company Law. The IoD will work with its members and the wider business community to consider ways in which company law regulations can be improved, simplified or abolished.

As Company Law Champion, Dr. Barker will assist the Government in the evaluation of the public’s proposals. He will seek to champion any ideas that could lead to a simplified and more business-friendly legal framework.

Areas of company law regulation which will be considered by the process include the following:

• Internal workings of companies and partnerships: Rules on shares and share capital, requirement to hold information at business premises and rules on meetings and resolutions.

• Accounts and returns: The content, form and auditing requirements of financial accounts and other reports.

• Business names: The rules covering company names

• Disclosure of company information: The regulations covering the information companies must supply to the official register.

Commenting on his role as Company Law Champion, Dr. Barker said:

“The Red Tape Challenge is an excellent opportunity for companies to get their voice heard and help inform government thinking and policies. Companies need to spend time on doing business, creating jobs and growing – not spending time filling in forms for no good reason.

We must be sure that regulation is proportionate and that the company law framework protects companies and their creditors, whilst minimising red tape and making the running of a company as simple as possible. I look forward to seeing some new and exciting proposals from business to help inform this important work.”

The Red Tape Challenge was launched by the Prime Minister in April 2011. It gives business and the public the chance to have their say on regulations in a number of key policy areas.
IoD members and other interested parties are invited to submit their views on company law regulation to the Government’s Red Tape Challenge website. Alternatively, they can send their comments directly to Dr. Barker at the IoD (roger.barker@iod.com).

“The tightrope walk between recession and recovery continues. We’ve taken one step towards a double-dip recession, and it’s now probably 50-50 as to whether we’ll take the second, with a fall in output this quarter as well.

“It’s important to stress that the 0.2% fall in GDP is not large and could be reversed as QE2 works through the economy. But even if output does increase in Q1 we’ll continue to experience the feel-bad jobless recovery for some time yet. Indeed, the combination of falling output and today’s MPC minutes suggest QE2 could be further expanded in February.

“The tipping point for recession or recovery remains economic developments in the eurozone. If the euro crisis gets worse, sustaining UK recovery looks almost impossible.”

“We welcome the measures announced by the Secretary of State this afternoon. Greater simplicity and transparency in the reporting of executive pay is urgently needed. A binding shareholder vote on executive remuneration policy will remind institutional investors of their key governance responsibilities. The Government is also right to consider ways in which boards of directors can become more diverse – companies must incorporate views beyond those of current and former executives in the setting of CEO pay.”

Commenting further, Dr. Barker said:

“The Government has done the right thing in rejecting calls for the mandatory inclusion of employees on remuneration committees. Nonetheless, boards should still consider ways in which they can engage with employees and other stakeholders on remuneration policy. This will be an important means of rebuilding trust in the UK business system, which has been understandably dented by the magnitude of recent increases in executive pay.”

“What goes up must come down. We are finally seeing the sharp falls in inflation which we expect to continue in 2012. VAT effects falling out of the year-on-year index, lower utility prices and weakening demand should exert strong downward pressure on inflation in 2012. Over recent years the inflation story has been all about overshooting. Looking ahead to 2013 it could be all about undershooting. Today’s inflation figures suggest that quantitative easing will be expanded in February”.

“Maintaining the status quo was the right decision for 3 reasons. Firstly, because changing policy in January before you have the full picture of the economy over Christmas is always risky. Secondly, because the MPC needs to see further evidence of the impact of QE2. And finally, because the MPC needs to see the extent to which ECB intervention as lender of the last resort to banks improves the outlook for sovereign debt. We think the euro crisis could yet get a whole lot worse and so we still expect a substantial increase in quantitative easing by the Bank of England this year.”

Following the Government’s decision to go ahead with the HS2 project, the Institute of Directors is warning that many businesses still need convincing that the £32 billion line is worth the cost, or should be prioritised ahead of other rail improvements.

A recent survey of over 1,000 IoD members found mixed views on HS2:

• 79% think that investment in improving existing intercity services is important to their business, compared with 54% who think that high speed rail investment is important.  Significantly, in every region a greater proportion of IoD members think that existing intercity upgrades are important to their business.

• 38% think that the public spending required to build HS2 would represent poor value for money, compared with 30% who think it would represent good value.  Two fifths (40%) of West Midlands members think that the public spending required to build HS2 would represent good value for money, compared with 41% who think it would represent poor value.

• 48% think that increases in airport capacity outside London and the South East would have a positive impact on the productivity of their business; 40% think the same for increased airport capacity in London and the South East, and just 23% agree that a new high speed rail line between Birmingham and London would improve their productivity.

Graeme Leach, Director of Policy at the IoD, said:

“HS2 now looks almost certain to go ahead, but businesses still need convincing of the merits of the project.  In all regions, IoD members think that improvements to existing intercity services are more important to their businesses.  It’s true that you can’t add capacity to current lines indefinitely, but there are still a lot of uncertainties about the business case for HS2.”

The IoD conducted a Policy Voice poll of 1,245 members in August 2011.  Directors were asked for their views on the existing state of the UK’s transport infrastructure and their priorities for new investment.

“There was very little Christmas cheer in the latest GDP figures. The Q3 growth rate was revised up from 0.5% to 0.6% but the Q2 rate was revised down from 0.1% to zero. The end result was yet more evidence for the L shaped recovery. But the key point is that you can’t see the road ahead to 2012 looking through the rear view mirror. When you look forward the euro-crisis is sitting in the middle of the road and we’re closing at speed. Quantitative easing by the Bank of England is a very powerful weapon, but the ECB can’t run the same policy. Instead it’s trying to undertake QE through the back door, by lending to banks, but this sharply reduces the odds of it easing the sovereign debt crisis. 2012 is going to be some ride – but don’t forget the Bank of England has a big bazooka in QE to help clear the road”.

A new survey of over 1,000 members of the Institute of Directors conducted after the recent EU summit has revealed strong support amongst business leaders for both the Prime Minister’s veto and for a looser relationship with the EU.

The key findings of the survey are:

• 77% of IoD members agree with the Prime Minister’s use of the veto at the EU summit, including 46% strongly agreeing.  19% disagree, including 11% strongly disagreeing.

• 63% of IoD members would like to see the UK in a looser relationship with the EU, including 42% who would like to see a repatriation of some powers, 21% who would like to see the UK withdrawing from the EU while retaining free trade, and 1% who would like to see the UK withdrawing altogether.  29% of IoD members would like to maintain existing levels of political and economic integration.  7% would like to see deeper integration, including 6% who would like to see stronger integration and 1% who would like to see a full political and economic union.

• 85% think that the measures agreed at the EU summit will fail to solve the Eurozone crisis, compared with 3% who think that the measures will succeed.

• 53% of IoD members say that the Eurozone crisis is not having an effect on their own business, whilst 42% say it is having a negative effect.

• 77% think that David Cameron’s use of the veto has changed the UK’s relationship with the EU, compared with 18% who think that it hasn’t.  Of those who think there has been a change in the UK’s relationship with the EU, 53% think it will be negative for the UK and 33% think it will be positive for the UK, while 10% think it will be neither negative nor positive.  It would appear that IoD members are concerned about the consequences of the summit, but still support the Prime Minister’s decision in the light of a wider assessment of our EU relationship.

Graeme Leach, Director of Policy at the IoD, said:

“The UK’s relationship with Europe is dominated by political and economic uncertainty but the business verdict is very clear. Almost two-thirds of IoD members want to see a looser relationship with the EU. There are also significant groups of directors on the other side of the argument, with 29 per cent supporting the status quo and 7 per cent wanting to see more integration.  The ongoing Euro crisis is changing attitudes towards the EU and we simply don’t know what 2012 will bring”.

The IoD carried out a Policy Voice survey of 1,068 IoD members between 16 and 21 December 2011.  Results have been rounded to the nearest 1% – totals may not sum exactly due to rounding.

“At last we have a little Christmas cheer. The decision of the ECB to offer unlimited 3 year loans at 1 per cent isn’t a game changer, but it’s the closest we’ve come to one throughout this crisis.

ECB President Mario Draghi didn’t walk outside his front door and shout that he would operate a lender of the last resort role for sovereign debt. That was never going to happen. Instead he walked out the back door to signal the ECB will use its lender of the last resort role for banks.

The IoD has consistently argued that direct ECB sovereign debt purchase is the route out of the crisis, but the indirect route shouldn’t be dismissed. Borrowing at 1 per cent and investing in peripheral euro-zone debt at 6 per cent is a very profitable carry trade. The question is: will it work? Euro-zone banks, with balance sheets shot to pieces, will be equally aware of the risk that they can lose even more money if the value of these bonds falls.

Euro-zone banks are engaged in massive de-leveraging and need to rollover more than 0.7 trillion euros in funding next year. In such circumstances it is not obvious they would use any money from the ECB to purchase high risk sovereign debt. The thought that they might has rallied financial markets before Christmas, but we’ll have to wait and see whether spirits remain high in the New Year.”

“We had mixed feelings about the final report from the ICB and we have mixed feelings about the Chancellor’s statement as well. We strongly support the measures aimed at improving competition in high street banking. High street banking desperately needs new entrants and this should be good for companies and consumers. The long timetable for implementation, stretching out to 2019, is also helpful. The last thing the economy and banking system need at present is an aggressive recapitalisation, with all the negative consequences for the money supply that would entail. Banks have enough to cope with at present from the euro crisis and any banking reform has to be mindful of this Sword of Damocles hanging over us”.

He added:

“Where we are less enthusiastic about the ICB report and the Chancellor’s statement is with regard to the impact of ring fencing. There must surely be doubt as to whether the ‘too big to fail’ problem has been solved. We remain sceptical that a major investment bank would be allowed to go down with no rescue attempt by the Government. The taxpayer is still on the hook.”