The Financial Reporting Council’s (FRC) latest three-year strategy has been released at a time when the government is seeking to encourage UK economic growth and investment, including by making the regulatory landscape work better for businesses. 

The strategy tries to balance its public interest remit with “smart, targeted and proportionate regulation” designed to support economic growth. This means a change to the FRC’s stated purpose, to reflect the government’s focus on growth and a more explicit articulation of its remit across professions.

It has removed reference to holding to account people responsible for delivering governance, financial reporting and audit at a high standard. It is part of how the FRC achieves its purpose, it says, rather than being viewed as an end in itself.

“If the FRC as a regulator is to encourage economic growth and investment, I believe it is important we support responsible risk-taking, not seek to eliminate it,” says Richard Moriarty, FRC CEO. “Our strategy puts this principle at its heart while ensuring we continue to encourage high standards in corporate governance, reporting and audit, which are vital foundations for businesses in accessing capital and broader stakeholder support to thrive.”

In this regard, the strategy identifies improving access to capital through a regulatory environment that builds trust in audit, corporate governance and corporate reporting, alongside five priorities the FRC sees as supporting economic growth: 

1. Underpin investor and broader confidence in UK plc; 
2. Embed the principle of proportionality into the work of the FRC; 
3. Understand relevant markets to identify whether they work effectively to support growth; 
4. Identify key future trends and innovations in the markets; and 
5. Work with others to support the future skills and resilience of the professions.

ICAEW response

Commenting on the strategy, ICAEW Policy Director John Boulton says: “Given the government’s focus on growth, it is a pity that more information has not been given on how the FRC intends the areas it has identified to drive growth.” 

In its comments to the FRC ahead of publication of the strategy, ICAEW had called on the FRC to supplement the document with a more detailed paper setting out how it would operationalise the growth priorities.

“This lack of detail is evident too elsewhere in the strategy, and although it is welcome that the FRC provides some transparency over its direction and priorities for the next three years, the document is too high level for the purpose it serves, which should be to chart a course for transition to the statutory regulator, the Audit, Reporting and Governance Authority, announced in the 2024 King’s Speech,” says Boulton. 

Boulton cites the example of the FRC’s Scalebox initiative to help smaller firms build audit capability and its intention to work with audit firms and others on innovations that could support growth and investment. “These are important contributions and for firms and professional bodies to contribute optimally to them, good communication is needed from the FRC for how and when these initiatives will develop,” he explains. 

Alongside the strategy, the FRC also published its plan and budget for the next 12-month period.