UK Government's Regulatory Reforms

The impact of removing additional reporting requirements

On 16 October 2023, the UK Government announced the withdrawal of proposed regulations, which would have imposed additional reporting requirements on businesses. This represents a significant shift in the regulatory landscape. While this decision is welcomed by many industry players, it raises questions about how it will affect larger UK-listed businesses, and the reporting requirements they must adhere to. We investigate what this means for larger companies, and how it may impact the London Stock Market in the future.

The proposed regulations, initially laid out in July, aimed to introduce a range of additional reporting requirements for large UK-listed and private companies. These requirements included an annual resilience statement, distributable profits figure, material fraud statement, and a triennial audit and assurance policy statement. However, these regulations have now been withdrawn following consultations with companies who voiced concerns about the burdensome nature of these requirements.

The withdrawal of these regulations aligns with the UK Government's broader agenda of simplifying and streamlining regulatory processes. This move is seen as an attempt to reduce the red tape for businesses, making it easier for them to operate in the UK. Large companies often bear a significant reporting burden and simplifying reporting requirements can reduce costs and administrative complexities.

For larger UK-listed businesses, this withdrawal represents a temporary relief from additional reporting obligations. While the specific regulations have been set aside for now, companies can expect a continued focus on reforming and simplifying non-financial reporting requirements. As a result, they may see a more targeted and effective framework in the future, which could ease the reporting process.

The London Stock Exchange, a key player in the UK financial sector, has welcomed the government's decision. The move is seen as a step towards enhancing the competitiveness of the London Stock Market, which is critical for attracting new businesses and investors. The withdrawal of additional reporting burdens could make the UK market more appealing for both domestic, and international investors. Good corporate governance should enable companies to grow and reach their full potential.

While the proposed regulations have been withdrawn, it's important to note that the government remains committed to wider audit and corporate governance reforms. These reforms include the establishment of a new Audit, Reporting, and Governance Authority to replace the existing Financial Reporting Council. These future reforms are expected to contribute to a more robust and efficient regulatory framework, which should benefit both businesses and investors.

The UK Government's decision to withdraw onerous reporting regulations is a significant step towards fostering a more business-friendly environment and bolstering the competitiveness of the London Stock Market. For larger UK-listed businesses, this represents a temporary relief from additional reporting obligations, with the expectation of a more streamlined framework in the future. I, for one, applaud this change as it allows large businesses to continue focusing their time and resources on their core operations that generate value for stakeholders, rather than being burdened by further extensive reporting requirements, administration, and costs. However, I do stress, it is crucial to strike a balance by reassessing the necessary transparency demonstrated, maintaining investor confidence, and ensuring robust risk management.

In a landscape where non-financial aspects, especially within the ESG (Environmental, Social, and Governance) sphere, are gaining pace and prominence, policymakers face, and will continue to face, the challenge of finding that middle ground for businesses. They must simplify regulations, while ensuring that businesses uphold ethical practices and transparency, safeguarding the interests of all stakeholders. As the government continues its pursuit of broader audit and corporate governance reforms, the regulatory framework for businesses in the UK is expected to evolve, striving to harmonise oversight and ease of conducting business operations.