Major new reforms to the UK’s audit regime will aim to safeguard British jobs, avoid company failures and reinforce the UK’s reputation as a world-leading destination for investment, the Business Secretary has announced (Thursday 18 March).
The UK is consistently placed as one of the leading destinations for foreign investment in Europe and around the world, but in recent years, investor and public confidence in how businesses are governed has been undermined by large-scale company failures, such as Carillion, Thomas Cook and BHS, leading to severe job losses and the British taxpayer picking up the bill.
To improve corporate transparency and strengthen the UK’s position as a world-class destination for investors, the government is launching a consultation on wide-ranging reforms to modernise the country’s audit and corporate governance regime, targeting the UK’s biggest businesses and ensuring markets work effectively.
Robust and rigorous scrutiny of large firms provided by auditors, as well as greater transparency and trustworthy information, is essential to ensuring that investors, employees and consumers have an accurate picture of the health of the company – underpinning a thriving, pro-enterprise business environment in the UK.
To unleash competition in the audit market, the government’s proposals would see the creation of a new audit profession overseen by a new regulator, which will aim to drive up quality and standards in the market and increase choice for businesses, while breaking up the dominance of the so-called “Big Four” firms. Last year, almost a third of FTSE 350 audits inspected were in need of improvement.
Business Secretary Kwasi Kwarteng said:
“Restoring business confidence, but also people’s confidence in business, is crucial to repairing our economy and building back better from the pandemic.
“When big companies go bust, the effects are felt far and wide with job losses and the British taxpayer picking up the tab. It’s clear from large-scale collapses like Thomas Cook, Carillion and BHS that Britain’s audit regime needs to be modernised with a package of sensible, proportionate reforms.
“By restoring trust in our corporate governance regime and encouraging greater transparency, we will provide investors with clarity and certainty, cement the UK’s position as the best place in the world to do business, and protect jobs across the country.
Commenting on the Government’s overhaul of the UK’s audit regime, Suren Thiru, Head of Economics at the BCC, said:
“The focus on making improvements to the audit industry is a positive step, particularly with the issues raised after a number of high-profile company collapses. However, government and regulators must tread carefully to avoid unintended consequences, including adding to the already onerous cost burden onfirmsand undermining the UK’s global reputation as great place to do business.”