UK corporate balance sheets are under threat due to fresh accounting standards that will massively increase the pension deficits of many already-indebted corporates. The study, by the legal advisors Lane, Clark and Peacock, also notes that corporates heavily invested in equities will be particularly susceptible.
The accounting standard, known as FRS17, was recently used to calculate a UK corporate pension deficit of £25 billion ($40 billion). This compares with a surplus of £5 billion under the former standards.
The larger the pension scheme in relation to the corporate, combined with the degree of exposure to equities, can mean the FRS17 regulations have huge distorting effects.
Alex Waite, a partner at the legal practice, comments: "FRS17 figures cannot simply be taken at face value. Shareholders will need to deepen their understanding of pension schemes over the coming years if they are to see through FRS17 to the true position. As a first step towards making an informed decision, they need to know which companies' balance sheets are particularly prone to large movements if, and when, FRS 17 is implemented. Our league table clearly shows the companies with pension schemes that will make them most exposed."