Key facts
- UK government reforms aim to save businesses over £450 million annually.
- SMEs will be exempt from certain reporting forms and audits.
- Average annual report length for UK companies is 98,000 words.
- FTSE 100 companies average 152,000 words in annual reports.
- Electronic communication with shareholders will become the default.
- The government dropped the Audit Reform and Corporate Governance Bill.
The UK government has announced significant reforms to corporate reporting requirements, aiming to reduce administrative burdens and save businesses an estimated £450 million annually. The overhaul includes exempting small and medium-sized enterprises (SMEs) from certain reporting forms and audits, a move intended to save these firms thousands of pounds and hours of administrative work.
According to the Department for Business and Trade, the average annual report currently stands at 98,000 words, with reports for FTSE 100 companies averaging 152,000 words. Business secretary Jonathan Reynolds stated that businesses are often "weighed down by pen-pushing paperwork and frustrating costs, ticking boxes that do nothing to help them grow their business." Data from 2023 indicated that 81% of executives at the UK's largest listed companies felt that reporting mandates were hindering their ability to perform their core jobs.
In addition to simplifying requirements for SMEs, the government is transitioning to a "digital-first" approach, making electronic communications with shareholders the new default and phasing out physical paperwork. The government is also exploring the use of artificial intelligence to further automate and streamline corporate reporting and compliance processes.
This initiative follows the Labour party's decision to scrap the Audit Reform and Corporate Governance Bill, which had been intended to overhaul audit and corporate governance by replacing the Financial Reporting Council (FRC) with a new regulator, the Audit, Reporting and Governance Authority (ARGA), with expanded powers. The bill was dropped to avoid placing major financial burdens on businesses.
Industry bodies have largely welcomed the proposed modernization. Jordan Cummins of the CBI described the moves as welcome and looked forward to a futureproofed and agile framework. Alan Vallance of the ICAEW expressed full support but encouraged the government to ensure all stakeholders are heard. Dean Beale of the Centre for Public Interest Audit noted the move towards proportionality and digital reporting sources. However, Andrew Moyser from MHA cautioned that stripping away statutory audit requirements for SMEs could create hidden traps, potentially shifting the burden rather than removing it and impacting long-term growth.