How reporters are tackling the macro-economic backdrop

In a recent survey by Accenture and the United Nations Global Compact, they found the greatest challenges faced by CEOs are inflation and price volatility (98%) and talent scarcity (96%); the next two challenges found are threats to public health and climate change.

With this in mind, our latest research looks at a sample of 30 Annual Reports of companies on the FTSE 350 with reporting year ends of June, July, August and September 2022. We explored how companies are reporting against the current macro-economic backdrop of rising inflation, cost-of-living pressures and employee wellbeing.

Key themes

Leadership statements

The majority of companies discussed the pressures in the current macro-economic environment in their leadership statements. Stronger reports focused on the actions they have taken to support employees; for example, AJ Bell’s Q&A, page 7 explains that the company is supporting employees through the cost-of-living squeeze with a focus on protecting them from the inflationary environment, supporting wellbeing and helping them to strengthen long-term finances. Some of the actions reported in the leadership statements include:

  • pay increases with a focus on lower-paid employees
  • one-off special payments, typically £1,000
  • creating a special fund to provide support for employees with emergencies.

Our research found that most companies addressed the macro-economic environment; there were some reporters who acknowledged the backdrop in their outlook narratives as opposed to explaining how they are responding.

The Luminous view                                                                                                

Detail how the current economic environment is affecting employees and other stakeholders, and give tangible examples of how the business is supporting them both qualitatively and quantitively.


Employee engagement

Many companies demonstrated the importance of engaging with employees to help inform decision making; employee surveys were a popular choice. Virgin Money UK, page 20 reported an increase in the uptake of respondents; this suggests more employees want to be involved in the decisions that impact them, particularly as they are faced with pressures from the cost of living. Some of the actions taken as a result of engagement outcomes include:

  • additional holidays to support employee wellbeing
  • enhancing the Employee Assistance Programmes
  • financial education initiatives.

DuneIm, page 103 presented an excellent case study in its section 172 statement, which demonstrated how the Board reached its decision in increasing pay across the business. The company discussed the pressures from a financial and recruitment perspective, and outlined the key stakeholder trade-offs.

The Luminous view

Highlight key stakeholder concerns around the economic challenges and how these made it to the boardroom table, along with the outcome of decision making.


Market reviews

The market review section presented an opportunity for companies to discuss the current environment in the context of their business, with many reporting on the impact it has on the business. We found that stronger reports included how the company would be responding to the issues raised. Britvic, page 20 concisely addressed each market trend and informed readers how the company is responding. Commonly discussed market themes included inflationary pressures on materials and changes to consumer spending.

The Luminous view

Where material, consider including a standalone market driver focused on the cost of living.



As companies navigate the current environment, clearly explaining what risks are being faced and articulating how these risks are managed can help readers to understand the key priorities of the business. Dechra Pharmaceuticals, page 80 highlighted an increased risk in attracting and retaining talent, while Virgin Money UK, page 66 linked this to the cost-of-living pressures and the impact on employees. Unsurprisingly, many discussed the importance of attractive remuneration packages and initiatives for supporting employee wellbeing.

Many companies reported geopolitical events in the context of Russia’s war in Ukraine and discussed cost efficiencies as a key mitigating factor to manage this risk. Smiths Group, page 51 reported strongly, clearly marking where risks have increased, and discussed the impact on the company’s strategy and business model along with providing examples of how it knows controls are working effectively. Additionally, Sage, page 97 highlighted using the company’s cybersecurity capabilities to strengthen resilience against potential cyber threats from Russia as well as making changes to its Sanctions Policy.

The Luminous view

Consider how the risk landscape has evolved and highlight any new risks to the business; also consider giving more focus on emerging risks.



The cost-of-living crisis poses a disproportionate impact on lower-paid employees. Companies that clearly show actions taken to support employees with cost-of-living pressures, particularly in the context of their wellbeing, demonstrate a commitment to the people in their business. Diageo, page 126 and Britvic, page 105 were good examples of this. Note that while many companies are increasing the average pay of employees, companies should be mindful their executive remuneration is not being based on average workforce pay; Diploma, page 116 disclosed that the CEO pay ratio had reduced as a result of lower share price appreciation. In addition to employee pay reviews and one-off special payments discussed earlier, our research found this section showcased a wide range of actions by companies to support employees including:

  • financial education workshops
  • raising awareness and enhancing employee assistance programmes
  • wellbeing and mental health days
  • wellness and fitness classes
  • focus on lower-paid staff.


Some of the companies that cite supporting lower-paid employees included Barratt Developments, page 106, Sage, page 149 and Close Brothers, page 124.

The Luminous view

Take note of the Investment Association’s (IA) letter to remuneration committee chairs. The IA highlighted the key areas of focus for its members when considering the remuneration practices of companies in the forthcoming AGM season. Topics covered included salary levels and the cost of living, windfall gains and the use of ESG metrics in executive remuneration. It also noted that the Institutional Voting Information Service (IVIS, which is part of the IA) will red top any remuneration policy or report where executive pension contributions are not aligned to the majority of the workforce.


For more information, contact Kirsten Winter.