How does the UK modernise corporate reporting to preserve investor confidence but lessen the burden on public companies?
The Department of Business and Trade hosted a roundtable for QCA members this week, ahead of the publication of Modernising Corporate Reporting, a key consultation paper which is due out shortly.
DBT hopes to streamline corporate reporting requirements to make compliance more efficient and flexible for the future.
Earlier this year, the Business Minister, Blair McDougall, said his ambition was “to make the UK’s reporting regime the most streamlined and proportionate in the world”.
The QCA report Close the Book: It’s Time to Cut Annual Reports Down to Size found that the length of the average annual report has grown to a staggering 98,000 words, longer than J.R.R. Tolkien’s The Hobbit. On AIM, the number stands at 42,000 – making reports a bigger read than The Lion, the Witch and the Wardrobe.
The seven company members that attended the event to discuss their hands-on, practical experience at quoted companies. The anecdotes and frustrations that they recounted mirrored the feedback we have heard from many other growth companies over the years.
The main question that our members posed for DBT to consider is this: if the annual report and accounts require more time and expense than they provide useful, decision-making information for investors and creditors, what is the purpose and value of excessive corporate reporting regulation?
From sectors including defence, social housing and recruitment, our members discussed the end-to-end process of compiling an annual report, the person hours it takes, as well as their complexity and growth in length over many years.
They highlighted concerns over audit relations, the potential for AI applications to make life easier, and, more broadly, the challenge to source investment and the need to encourage a greater risk culture for business. They discussed the burden of cumulative regulation for smaller companies and the trickle-down effect that a risk-averse audit market has created.
We want to extend our thanks to Celeb Deeks, Director General Competition, Markets and Regulatory Reform Group, Department for Business and Trade and Linda Timson, Director, Company Law & Governance, Department for Business and Trade, for the invitation and their engagement with the company experience.
And thank you to our small and mid-cap members for giving up their time – some of them during their latest annual report preparation.
Our job now is to ensure these views are encapsulated in the consultation process – and the output is a more realistic, useful, proportion reporting regime.
