The move will help convey the message that the country's attitude to bureaucracy and red tape is changing. British start-ups have a problem; just one in five small businesses grew their revenue in the second quarter of this year, says the Federation of Small Businesses. The government's response is to exempt fledgling companies from audit fees.
For the typical midsized business, the UK government's plan would bring an immediate saving of just £31,000, according to the Financial Reporting Council. The risk is that this is swiftly offset by an increase in borrowing costs, as lenders lose the comfort of an independent audit report. In many cases, financiers might insist on audits being done anyway.
Paperwork isn't the main reason UK start-ups struggle; a bigger obstacle is finding investors to fund the next stage of their growth. Last year's Mansion House Accord tries to channel more UK pension savings into unlisted British assets. That's a welcome change of tack, given they put a mere one-thousandth of a per cent of their assets under management into venture capital in 2024, versus 0.03 per cent in the US, according to European VC firm Atomico.
Despite all that, getting rid of mandatory audits helps convey the message that the country's attitude to bureaucracy and red tape is changing. Up to one in 10 UK SMEs are so downbeat about the economy that they are put off applying for funding, according to the University of St Andrews. In particular, it suggests Andy Burnham's government is moving away from.
Source: Financial Times Companies · Summarized by HeadlinesBriefing