The government has faced backlash from prominent industry leaders following its decision to abandon the Audit Reform and Corporate Governance Bill. In an open letter to Business Secretary Peter Kyle, the leaders expressed their discontent, describing the move as “a significant step backwards,” especially after the government’s commitment, outlined in the King’s Speech, to introduce a draft Bill.
On March 5, 2024, the Department of Business and Trade announced the decision to scrap the proposed legislation, citing the need to “avoid significant new costs to firms.” This announcement was somewhat obscured within a detailed press release, raising concerns among business leaders about the government’s commitment to enhancing corporate governance.
The Audit Reform and Corporate Governance Bill aimed to replace the existing Financial Reporting Council (FRC) with a new regulatory body, the Audit, Reporting and Governance Authority (ARGA). This overhaul was initially shelved by the previous Conservative government in November 2023, with a focus on promoting growth and competitiveness in the UK economy. However, the Labour Party’s recent ascension to power brought the reform back into consideration.
On March 6, 2024, Jonathan Geldart, director general of the Institute of Directors, alongside Anne Kiem OBE, chief executive of the Chartered Institute of Internal Auditors, and Catherine Howarth, chief executive of ShareAction, joined ten other industry leaders, campaigners, and academics in addressing Kyle. The letter emphasized the necessity for stronger oversight of major corporations to foster economic growth and stability.
“If the government is serious about driving growth and delivering economic stability, it must act to prevent further avoidable failures through stronger oversight of our largest companies,” the letter stated. The signatories urged the government to prioritize the publication of a modernized corporate reporting framework and to expedite the establishment of a strengthened audit regulator.
In a separate communication, Dean Beale, executive director of the Centre for Public Interest Audit, expressed his disappointment with the government’s decision to withdraw the Bill. Beale’s sentiments reflect a broader concern among industry stakeholders regarding the implications of reduced regulatory oversight on corporate governance in the UK.
The decision not to proceed with the Audit Reform and Corporate Governance Bill raises significant questions about the government’s future approach to corporate accountability and transparency. As the landscape of business regulation evolves, stakeholders remain vigilant, advocating for reforms that ensure robust oversight mechanisms are in place to protect the integrity of corporate governance.
