A Summary of DBT’s Simpler Corporate Reporting Consultation, following recent announcements on the increase in company size thresholds

In the same week the new government confirmed that it will be continuing with legislation to increase company size thresholds, the DBT published a summary of its responses to its consultation on corporate reporting aimed to simplify non-financial reporting for medium-sized businesses. Here we outline the results of the consultation which was launched on 16 May 2024.

DBT simpler corporate reporting consultation

Two main proposals were the focus of the consultation:

Raising the Employee Threshold: The consultation suggested increasing the threshold for medium-sized companies from 250 to 500 employees. This would exempt more businesses from certain reporting requirements.

Exempting Companies from the Strategic Report: The government also proposed removing the need for medium-sized companies to prepare a Strategic Report, reducing the administrative burden.

Main findings

The consultation on simplifying corporate reporting received 42 responses, with the majority supporting the proposed changes. Most respondents agreed with raising the medium-sized company threshold from 250 to 500 employees (27 out of 41) and exempting these companies from producing a Strategic Report (24 out of 37).

The key reason for support was reducing the reporting burden, especially for companies on the lower end of the large business threshold. However, concerns were raised about transparency, corporate governance, and the need for a more holistic review of the reporting framework to avoid unintended consequences.

Summary of responses by question

Included in the summary of responses are insights into the questions asked in the consultation:

Question one: Do you agree or disagree with the uplift of the employee threshold from 250 to 500 employees for ‘medium-sized’ companies? Please explain your answer.

In respect to question one of the consultation, respondents highlighted that smaller companies (251–500 employees) often lack the resources to meet the regulatory demands of large businesses. Supporters emphasised reducing the reporting burden, while others expressed concerns about weakened accountability, poor governance, and fragmented frameworks. Some preferred a broader review of reporting thresholds, suggesting that isolated changes may have limited impact or unintended consequences.

Question two: Do you agree or disagree with exempting medium-sized private companies from having to prepare a Strategic Report? Please explain your answer.

The question on exempting medium-sized companies from preparing a Strategic Report received 37 responses, with 24 supporting the proposal. Supporters highlighted that this would alleviate time and cost burdens, particularly for businesses without large management teams. Some respondents saw the report as redundant, especially for subsidiaries or companies with direct stakeholder engagement. However, opponents argued that the Strategic Report is essential for transparency, risk management, and corporate accountability, especially regarding ESG issues. Many called for a more comprehensive review of reporting requirements rather than isolated changes.

Question three: Please provide any evidence you have regarding the usefulness of the information medium-sized private companies provide to their shareholders or other stakeholders in their Strategic Reports.

The question regarding the usefulness of information in Strategic Reports received 22 responses, revealing mixed opinions.

Some respondents, including qualified accountants and SME founders, questioned the report's value to stakeholders, citing a lack of substantive evidence. Conversely, others emphasised its importance for insights into a company’s strategy, risk management, and performance. Concerns were raised about the quality of reporting, with calls for meaningful disclosures rather than boilerplate content. High-quality reporting was seen as beneficial for stakeholder engagement and informed decision-.

An update on changes to company size thresholds and plans for the future

The new UK government has announced it will continue to implement changes to company size thresholds, laying legislation by the end of the year, aiming to adjust classification standards for small companies.

This shift is part of an initiative to streamline regulatory requirements, reduce administrative burden, and align with international practices. The update will affect reporting requirements and compliance obligations, particularly benefitting smaller companies with less complex regulatory expectations.

The government has, however, indicated that it will not be pursuing the proposals outlined in the DBT consultation at this time although they may form part of a broader consultation in 2025.

How can Mercia help?

Mercia offers a range of training courses, more specifically Mercia held a training course on the impact of company size threshold changes on the audit profession.

Additionally Mercia also offers support products including manuals to aid compliance with the regulations and offers a comprehensive technical query service for advice on your specific circumstances.