Ministers have announced sweeping reforms to corporate reporting, aiming to save businesses over £450m annually by ditching “Hobbit-length” paperwork.
Under the overhaul, small and medium-sized enterprises (SMEs), including local family firms, will be exempt from certain reporting forms and audits, aiming to save businesses thousands of pounds and hours of administrative work.
The Department for Business and Trade said that the average annual report now runs to 98,000 words, longer than J.R.R. Tolkien’s The Hobbit, and for FTSE 100 companies that number swelled to an average of 152,000 words.
Business secretary Jonathan Reynolds said: “No-one goes into business to fill out forms.” He added, “For years, hardworking firms in this country have been weighed down by pen-pushing paperwork and frustrating costs, ticking boxes that do nothing to help them grow their business.”
In 2023, 81 per cent of executives at the UK’s biggest listed companies reported that onerous reporting mandates were “eating up their time” and actively preventing them from doing their actual jobs.
In addition to relaxing the rules for SMEs, the government is establishing a “digital-first” approach, with electronic communications to shareholders becoming the new default and ending reliance on physical paperwork.
Alongside the cuts to red tape, the government is exploring how AI can further automate and streamline corporate reporting and compliance in the future. “We’re stripping back outdated bureaucracy and building a common-sense system fit for a 21st-century economy,” Reynolds added.
The move follows Labour’s scrapping of the long-awaited audit reform, the Audit Reform and Corporate Governance Bill, as it wanted to avoid placing major financial burdens on businesses. The proposed plan was supposed to overhaul audit and corporate governance by replacing the Financial Reporting Council (FRC) with a new regulator, the Audit, Reporting and Governance Authority (ARGA), which would have had expanded powers.
Buried deep in a detailed announcement in January, the Department of Business and Trade confirmed it dropped the Bill.
Industry bodies welcomed the modernisation
Jordan Cummins, UK competitiveness director at the Confederation of British Industry (CBI), said: “Corporate reporting is a central piece of investor and market confidence, but it’s also a resource heavy process for many businesses.”
“Moves to modernise our reporting regime are welcome and firms across the UK will look forward to helping government and regulators land on a futureproofed and agile framework,” he added.
Alan Vallance, ICAEW chief executive, said: “We fully support this initiative but with such transformative change to the reporting regime promised we’d encourage the government to take time to ensure all stakeholders are listened to, and all options are fully considered. We look forward to responding to this consultation in due course.”
Dean Beale, executive director of the Centre for Public Interest Audit, added: “At first glance, the consultation covers some of the right things: bringing in greater proportionality to UK corporate reporting requirements, and moving corporate reporting on from lengthy PDFs to a fully digital information source for key stakeholders.”
From an advisory perspective, Andrew Moyser, head of audit at MHA, welcomed the government’s efforts to simplify corporate reporting for SMEs, but warned that stripping away statutory audit requirements could create hidden traps, shifting the burden rather than removing it and potentially harming a company’s long-term growth.