On 20 January, the Labour government put out a self-congratulatory press release about its new economic growth package and slashing regulatory red tape.
Given that the first half bangs on about Octopus Energy spin-off Kraken Technologies — you’d be forgiven for missing Labour’s latest U-turn halfway down the presser.
Quietly, almost with embarrassment, one might say, the Department for Business and Trade (DBT) slipped in the news that it’s scrapping the long-awaited bill to reform the audit market.
We know, we know, it’s not yet another dunk on Trump or Farage, but financial auditing processes are important too, dammit.
Carillion collapse
The prospect of audit reform first entered parliamentary debate in 2018. It followed the ruinous collapse of Carillion, a major UK-based construction company which folded suddenly under £7bn debt. With it, Carillion took 3,000 jobs, and affected 75,000 people along its supply line.
The chaos prompted by Carillion’s dissolution hit 450 public infrastructure projects, including schools and hospitals. Those public-sector jobs made up 45% of the company’s revenue. Despite these financial struggles and two profit warnings from Carillon itself, the government continued to issue contracts with a price-tag of it £2bn.
In the end, it was the most costly corporate failure ever handled by the Official Receiver. The bill to the taxpayer eventually totalled more than £150m.
Carillion’s sudden collapse, the government’s continued support, and its massive knock-on effect on the UK economy led to the country’s auditing system being declared unfit for purpose. Similar, though less dramatic, stories of auditing malfeasance surrounded the demise of Patisserie Valerie, Thomas Cook and Wilko.
Audit Reform Bill
The talk of re-making the audit and corporate governance process to prevent a repeat catastrophe eventually led to the birth of the Audit Reform Bill. The plan would have replaced the failed Financial Reporting Council (FRC) with a more powerful Audit, Reporting and Governance Authority (ARGA).
As the Financial Timesexplained regarding the Audit Reform Bill:
The bill would have reclassified the largest private companies as “public interest entities”, subjecting them to tougher audit scrutiny, and sought to increase competition by requiring joint audits involving smaller firms. A separate proposal to hold non-accountant directors responsible for reporting failures prompted a wave of lobbying and negotiations.
The Financial Times also noted that:
Three of its central proposals — mandating stricter oversight of audits at large private companies, measures to force the Big Four accounting firms to share audits with smaller firms and stronger accountability for company directors — were watered down or shelved amid sustained lobbying.
Despite multiple independent reviews, a government white paper and extensive public consultation, no legislation was brought forward in the eight years since Carillion’s collapse.
Empty promises
In fact, the Tories shelved the plans back in November 2023. They claimed instead that they wanted to focus on “growth and the UK’s competitiveness”.
Labour then pledged to reintroduce the bill if they won the 2024 election. Sure enough, they even included it in their first King’s Speech of the same year. In fact, it was the fifth sentence of the lengthy address:
Bills will be brought forward to strengthen audit and corporate governance, alongside pension investment [Draft Audit Reform and Corporate Governance Bill, Pension Schemes Bill].
In September 2025, the DBT assured the Buisiness and Trade committee that it was opening a new consultation on the bill. After that announcement, over 60 MPs urged Starmer to end the wait for the reforms. Even just last week, FRC chief executive Richard Moriarty called, yet again, for the legislation to be finalised.
Now, it’s gone the way of the dodo.
‘Cutting the red tape’
In its 20 January 2026 press release, the DBT quietly announced that it would drop the Audit Reform Bill. The statment read:
The Government is also scrapping the Audit Reform Bill to avoid significant new costs for large firms, pressing ahead with plans to allow virtual AGMs and streamline corporate reporting, and launching a consultation on 20 January to speed up and simplify competition investigations—working closely with the CMA [Competition and Markets Authority] while preserving its independence.
So we’re scrapping the bill that was meant to prevent corporate giants from gambling with the UK’s economy. In its place, wonder of wonders, we’re allowing companies to hold their Annual General Meetings over Zoom.
Meanwhile, we’re actually removing reporting duties. That is the exact opposite of the intention behind the Audit Reform Bill. Truly, the economic masterminds at Labour HQ are without equal.
Speaking of economic masterminds, business secretary Peter Kyle boasted that:
For too long, Britain’s most promising companies have had to look abroad for the backing they need to grow. Scale-ups that should have become homegrown champions struggle against a system that is too slow and too fragmented. This package changes that.
We are placing big bets on the industries where Britain can win, backing our innovators with real firepower, and cutting the red tape that holds them back. This is what decisive government looks like – creating an economy that can grow and deliver prosperity for all.
Gambling with your money
The problem is that Labour is placing those big bets with what is ultimately UK taxpayer money. The red tape it is cutting was intended to hold companies back from dragging the country into financial ruin.
The government is playing an intensely dangerous game. It’s trying to lure companies into the UK with the promise of light-touch oversight, allowing them to play fast-and-loose with their accounting.
However, this promise itself is likely to put off more cautious firms. It’s a warning to any that do not want to invest in an economy that could collapse at any minute. As Alan Vallance — chief executive of the Institute of Chartered Accountants in England and Wales — pointed out:
The government had itself recognised that an audit reform bill would increase global investor confidence in UK companies and boost the prospects of growth.
This latest Labour U-turn isn’t as headline-grabbing as digital ID or Personal Independence Payments. However, it does show, yet again, that the party is concerned with trying to hit the Trump/Farage-style soundbites — slashing red tape, reducing government oversight, placing bets Britain can win.
Unfortunately, Starmer and the DBT have forgotten precisely the calamity that led to the Audit Reform Bill in the first place. Without oversight, large companies can and will take the UK down with them in pursuit of quick cash.
Featured image via the Canary
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