Directors’ reports to be scrapped and more companies to be exempt from strategic reports

As reported by ICAEW

In a package of reforms aimed at reducing bureaucracy and supporting businesses growth, the UK government has announced plans to remove the requirement for companies to prepare a directors’ report as part of their annual report and accounts.

The Department for Business and Trade (DBT) and HM Treasury have updated the government’s Regulation Action Plan and outlined plans to reduce corporate reporting requirements on thousands of companies.

First published in March 2025, the plan sets out the UK government’s approach to regulation and regulators and includes a commitment to reduce regulatory administrative costs for business by 25%. Last week’s announcement includes a progress update together with next steps to achieve that vision.

Reforms were announced relating to DBT’s plans to modernise and simplify the UK’s corporate reporting framework. Certain legislative changes will now be brought in as quickly as possible with a more holistic consultation on the ‘Modernisation of Corporate Reporting’ will follow in 2026.

Swift legislative changes

Three legislative changes will be introduced as swiftly as possible:

• The requirement to prepare a director’s report will be removed for all companies, affecting approximately 440,000 companies.

• Most medium-sized private companies will be exempted from the requirement to prepare a strategic report as part of their annual report and accounts, benefiting up to 44,000 companies.

• Approximately 7,000 wholly-owned subsidiaries will be exempted from preparing a strategic report provided their disclosures are included in the UK parent’s annual report and accounts.

  
  

These changes were due to form part of a comprehensive consultation on non-financial reporting which was expected later this year. However, having undertaken a period of pre-consultation over the summer and with the government’s number one mission of economic growth at the forefront of minds, it was decided to bring these changes forward. It’s estimated the changes will save businesses in the region of £230m per year.

Commenting on the announcement, Sally Baker, ICAEW’s Head of Corporate Reporting Strategy, said: “We know growth is being held back because it’s too difficult and too costly to do business. The swift introduction of these changes, alongside the increased monetary size thresholds introduced earlier this year, will result in more proportionate and less duplicative reporting for a significant number of companies; a direction of travel that we strongly support. That said, the removal of the directors’ report will raise intricate points of detail that will need to be worked through.”

Holistic corporate reporting consultation in 2026

Through their pre-consultation engagement over the summer, DBT concluded that the issues faced by businesses under the corporate reporting framework went beyond non-financial reporting.

Under the newly appointed ministerial team of Peter Kyle, Secretary of State for Business and Trade, and Under-Secretary Blair McDougall, it’s been decided to expand the scope of the consultation. Financial reporting, remuneration reporting and governance reporting will now be included, as well as how reporting can be modernised for the digital age. In other words, the consultation will consider the annual report and accounts in its entirety.

To reflect its broader scope, the programme will be framed as the ‘Modernisation of Corporate Reporting’ with consultation expected in 2026.

Baker welcomes the holistic approach. “Through many of our recent consultation responses, we have expressed the importance of reporting being purpose-driven and called for a more comprehensive approach that considers the purpose of the annual report and its users,” she said.

“It’s particularly pleasing, therefore, to read the minister’s commitment behind this broader initiative to restore corporate reporting to providing concise, decision-relevant information to investors and creditors. Using the deep knowledge and expertise of our members, we look forward to responding to the planned consultation next year.”

Gathering business insight

Blair McDougall, in his ministerial statement accompanying the announcement, has published a business survey to gather direct insight from those for whom regulation is creating unnecessary burdens.

The survey, open until 16 December 2025, offers businesses and others the chance to tell government directly which regulations, forms, compliance processes and regulators are imposing undue or unnecessary burden. 

Backing business-led growth

Drawing on members expertise and our research, ICAEW is offering policymakers advice on how to tackle the three key barriers to growth.