No more directors’ reports for SMEs, says chancellor

In a bonfire of regulations, chancellor Rachel Reeves plans sweeping changes to corporate reporting requirements for small to medium sized businesses to cut ‘pointless red tape’

The chancellor Rachel Reeves kicked off the first ever Regional Investment Summit with a blitz on business bureaucracy announcing cuts to ‘pointless red tape’ and promising to save UK companies nearly £6bn per year by 2029, equivalent to 200 hours of admin work a year. 

Speaking to business leaders in Birmingham, Reeves called for a ‘future that we must build hand in hand with business’, stressing the importance of ‘a new relationship between government and business to break down barriers’.

‘I believe that a strategic state must know when to intervene but it must know when to step back,’ the chancellor said. ‘The reduction in regulation will save businesses £6bn a year by the end of this parliament – it will save 200 hours of admin a year.

‘Today we are going further to reduce corporate reporting requirements, scrapping needless form filling for tens of thousands of businesses and taking the savings for businesses from our reforms to over £1bn a year already.’

One of the key reforms is an overhaul of corporate reporting rules, removing smaller businesses from the requirement to produce a strategic report and, for other companies, simplifying requirements for other narrative reporting.

Around 50,000 companies will no longer have to complete a strategic report as part of their annual report, saving these businesses an estimated £230m in admin costs. The government said 47% of businesses said that ‘regulation is an obstacle to their success…and a challenge to their business’, with just two in five saying regulators ‘helped them to comply with regulation’.

The legislative changes will:

• exempt medium-sized private companies from producing a strategic report in the annual report;
• exempt wholly owned subsidiaries from producing a strategic report where they are covered by the reporting of a UK parent; and
• remove the requirement to produce a directors’ report, with some provisions to be removed entirely, and others relocated elsewhere in the annual report.

The monetary size thresholds for micro, small, medium and large-sized companies will be increased by approximately 50%, enabling up to 132,000 companies to benefit from lighter touch requirements.

The government also plans to eliminate ‘duplicative or redundant reporting requirements from the directors’ report and director’s remuneration report and policy.

This is seen as the initial step in reducing red tape for businesses with plans to consult next year on further significant changes to annual reports and accounts as part of an expansion of the modernisation of corporate reporting project.

‘Our vision is not just about cutting admin time, it is about regulating proactively to support innovation and investment,’ Reeves said. ‘So today I can announce three new reforms to boost competition and make the UK a top destination for global capital.

‘We will consult on a cross economy AI sandbox modelled on the successful FCA’s pioneering fintech sandbox to allow new AI products to be developed under supervision by regulators, accelerating approvals for the use of AI in legal services, planning and advanced manufacturing.’

In addition, Reeves said there will be reform of the Takeover Panel on mergers and acquisitions (M&A) to speed up transactions and the approval process, driven by changes at the Competition & Markets Authority (CMA).

There will also be changes to the financial thresholds for charities in the coming weeks with plans to reduce reporting requirements for charities of all sizes, generating around £47m of administrative savings per year. The details will be announced shortly with the new framework due to come in to force in 2026.

Reeves also confirmed that commercial drone operations will be rolled out by 2027, with a roadmap to be set out by Civil Aviation Authority.

‘These are the right choices to power our economy so businesses can invest with confidence,’ said Reeves.

In addition, there will be new initiatives to drive regional investment with projects earmarked for Liverpool, Plymouth, Port Talbot and Birmingham.

The measures are part of the government’s 25% admin reduction target - a central commitment in the Modern Industrial Strategy to make it easier and quicker to do business in the UK.  

Reeves told delegates: ‘Our mission is clear: to create the right environment for investment through our regulatory reforms, to crowd in capital through our public financial institutions, to break down silos to collaboration on local projects, and to support innovation and growth throughout the UK.’

In a paper published at the same time as the speech, the Treasury set out a raft of plans to reduce red tape and underpin the government’s growth drive, as it faces a tricky run-up to next month’s Budget.

The Financial Reporting Council (FRC) has been told to clarify the UK Corporate Governance Code guidance to make clear that the payment of non-executive directors in shares is appropriate, enhancing the ability of UK listed companies to attract the highest calibre of talent on the global stage. The updated guidance will be published by the FRC in early November.

Following consultation with stakeholders, the Treasury is going ahead with a plan to transfer all anti-money laundering (AML) and counter-terrorist financing (CTF) supervision to the Financial Conduct Authority (FCA).

This will consolidate the current mishmash of 22 professional services supervisory bodies each monitoring their own sectors, giving the FCA responsibility for all AML/CTF supervision.

To control excessive regulatory reach, the Department for Business & Trade is going to set up a regulator dashboard, displaying performance against KPIs and authorisation processing times across an initial 16 key regulators, making it easier for businesses and stakeholders to monitor regulator performance and access relevant information.

The Treasury also reiterated that HMRC will become a ‘digital-first organisation with a minimum of 90% of all customer interactions undertaken digitally by 2029-30 as part of its commitment to improving customer services’.

HMRC will announce further steps to improve the ‘experience of UK business’ by simplifying some processes, having identified four problem areas, particularly for start-ups. No details are as yet available on exact improvements envisaged by the tax authority, but customer service is likely to be high on the priority list.

While the latest changes to corporate reporting will reduce costs for some companies, plans to introduce the Employment Rights Bill with the first wave of day one employee rights kicking in from April 2026 are estimated to cost organisations £5bn a year once all the rules are in force based on government costings.

Details of the full proposals are set out in the Treasury Regulation Action Plan - Progress Update and Next Steps

Source - Business & Accountancy Daily

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