Labour scraps Audit Reform Bill to ‘avoid’ costs on firms
The Audit Reform and Corporate Governance Bill, added into Labour’s first King Speech, is now being scrapped to “avoid significant new costs to firms”.
The reform was first raised in 2018 following the collapse of Carillon, but has been on and off the table ever since.
The Bill was shelved by the previous government in November 2023 in order to focus on “growth and the UK’s competitiveness”, but returned to the table when Labour took power.
The proposed plans were 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.
However, the Department of Business and Trade confirmed this morning, buried deep into a detailed announcement, that it was scrapping the Bill to avoid significant new costs for large firms.
Instead, it is pressing ahead with plans to allow virtual annual general meetings and streamline corporate reporting, as well as launching a consultation on 20 January to “speed up and simplify competition investigations”.
The department said it was working closely with the Competition Market Authority (CMA) “while preserving its independence”.
Commenting on dropping the Bill, FRC CEO Richard Moriarty stated, “The government’s confirmation that it intends to put the FRC on a full statutory footing is welcome news, rightly bringing us into line with other major UK economic regulators and addressing where there are gaps in our information gathering powers.”
“We recognise the government is balancing many competing priorities, which means the full package of reforms is not being taken forward — but the FRC has not been standing still and we will continue our work supporting confidence and growth in the UK economy,” he added.
Just last week, Moriarty issued a direct warning to the government, urging them to pass audit reform legislation during “peacetime” rather than waiting for a major corporate collapse or scandal.
Alan Vallance, ICAEW chief executive, said: “We cannot hide our disappointment that eight years since the collapse of Carillion and after many false dawns, the government has decided to scrap the audit and corporate governance Bill.”
“The final piece in the puzzle is to give the FRC as regulator all the tools it needs to carry out its job,” he added.
This move comes as Business Secretary Peter Kyle revealed on Tuesday plans to back British scaleups with a growth package and a red tape review.