The UK government has faced criticism from a number of investor and corporate governance groups for its decision to scrap its long-awaited Audit and Corporate Governance Reform bill, arguing that it could harm the UK’s reputation as a centre for institutional investment.
The legislation was expected to introduce a new definition for public interest entities, make directors more accountable for their reporting requirements and to establish a new regulator with enhanced powers.
However, according to the Department of Business and Trade, the bill was scrapped in order to “avoid significant new costs” for major organisations at a time when the government’s priorities were supporting growth and reducing administrative burden.
The UK Sustainable Investment and Finance Association (UKSIF) stated that the decision risks undermining the UK’s reputation as a competitive international financial centre with strong governance and high-quality audit standards.
“The choice to abandon plans to further strengthen these foundations represents a huge missed opportunity, which has the potential to undermine the UK’s growth and competitiveness in the long term,” said James Alexander, UKSIF chief executive.
“We could see the consequences of this decision felt ultimately by businesses, investors, employees and consumers in the future, and we would urge the government to look again at this.”
Meanwhile, Caroline Escott, chair of the £150 billion Governance for Growth Investor Campaign, also urged the campaign to think again, while also pointing out that the decision came on the eighth anniversary of the collapse of construction firm Carillion.
“High-quality audits and sensible corporate governance standards are vital for healthy capital markets and act as a foundation for growth, confidence, and resilience in the UK economy,” said Escott.
“Although the modernisation of corporate reporting initiative is to be welcomed, streamlining corporate disclosure is no substitute for implementing sensible and widely welcomed measures on PIE status, director accountability and audit market oversight that would have helped protect people’s savings,” she said.
“We urge the government to reconsider its decision. Good governance is fundamental to the UK’s economic growth, and high audit standards enable the high-quality audit that supports value creation in the interests of companies, investors, and everyday UK savers alike.”
