Regulation Regression: UK Axes Audit and Corporate Governance Reform Bill
22 January 2026
The UK government has ditched its long-awaited Audit and Corporate Governance Reform Bill in a controversial decision which has courted condemnation from corporate governance experts.
The much-anticipated bill was first mooted in 2018 after the high-profile failures of construction company Carillion and department store retailer BHS. Its core aims included introducing a new Audit, Reporting and Governance Authority to augment audit supervision, recategorising some large private firms as public interest entities and heightening the scrutiny their audits face and boosting competition by reducing reliance on the Big Four accounting firms.
By enacting these changes, the bill aimed to enhance accountability for company directors and improve transparency for investors and stakeholders. Industry experts have warned that abandoning the bill risks negatively impacting the UK’s long-term competitiveness and growth.
Key Client Takeaways:
Audit Reform Bill Scrapped
- The UK government has abandoned the long‑awaited Audit and Corporate Governance Reform Bill, citing economic growth priorities, reduced urgency and limited parliamentary time.
Shift Toward Deregulation
- Instead of new legislation, the government plans to focus on simplifying and modernising corporate reporting to reduce business costs. The government intends to consult with investors and firms on “streamlining” later this year.
Strong Criticism from Investors
- Governance experts and major investor groups warn that shelving the bill undermines audit quality, market confidence and long-term UK competitiveness.
The UK’s Minister for Small Business and Economic Transformation cited three reasons for not moving forward with and consulting on audit reform legislation in a letter published this week. These reasons were: to “promote economic growth and reduce administrative burdens; the need for major reform being “less pressing than it [previously] was”; and the government “pursuing an ambitious legislative programme” when “parliamentary time is limited”.
According to the letter, while the reforms would have been “beneficial” they would have increased costs on business, with the government instead opting to prioritise deregulatory measures. “We intend to focus instead on the simplification and modernisation of corporate reporting,” the document read. “We want to make the UK’s reporting regime the most streamlined and proportionate in the world and will launch an ambitious consultation this year to co-design these changes with companies and investors.”
Labour had revived the bill, which was put on hold by the previous Conservative government, with it being mentioned in their first King’s Speech following their victory in the 2024 general election. The government also this week confirmed controversial plans to press ahead with allowing virtual AGMs, something which could prove detrimental to shareholders, as previously covered by Minerva Analytics.
The letter also claimed that there has been a “great deal of progress” since Carillion’s 2018 collapse, as well as “considerable improvement in the quality of audit regulation, and of audit itself”. It pledges to continue support of the measures taken by the Financial Reporting Council (FRC) to make the audit market work better, minimise the administrative burden of regulation and to support growth. FRC CEO Richard Moriarty last week urged the government to pass audit reform legislation during “peacetime” rather than waiting for a future major corporate collapse or scandal.
The move drew criticism from several senior figures in the world of corporate governance, including Caroline Escott, Chair of the Governance for Growth Investor Campaign (GGIC) and Head of Investment Stewardship and Co-Head of Sustainable Ownership at Railpen. “Eight years after Carillion’s collapse and only a few months after audit and controls issues wiped off almost £600 million of shareholder value in one day at WH Smith, we’re disappointed that these necessary and important audit reform measures have been shelved,” said Escott.
“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,” she added. “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.”
Investors with more than U$245 trillion in AUM last month backed a report from the GGIC which challenged “misconceptions” about corporate governance and its role in capital markets and show that strong governance is a “catalyst for sustainable economic growth” rather than being a barrier, as reported by Minerva Analytics.
James Alexander, Chair of the UK Sustainable Investment and Finance Association (UKSIF), also criticised the UK government’s decision to scrap the bill. “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,” he warned. “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.” Minerva Analytics is one of UKSIF’s more than 300 members, which collectively represents £19 trillion (U$25.6 trillion) in AUM.
The fallout from the Carillion scandal continues to cast a long shadow, with the UK’s Financial Conduct Authority this week fining two of the firm’s former finance directors for their role in the company publishing “misleading statements”. Since the collapses of Carillion and BHS, several major companies have failed due to auditing and corporate governance issues, including Patisserie Valerie, Thomas Cook and WH Smith, which have resulted in thousands of job losses.
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Last Updated: 22 January 2026