Small and micro businesses are expressing relief following indications that the government may reverse its decision on implementing stringent new Companies House regulations.
Initially set to take effect in April 2027, these regulations would have compelled small and micro enterprises to reveal their profit and loss accounts for the first time by abolishing existing exemptions and mandated the use of external software for account filing, as reported by .
However, Business Secretary Jonathan Reynolds is expected to intervene and maintain the status quo, after concerns were raised by startups and investors about the potential challenges posed by the new rules.
A confidant of Mr Reynolds informed the Financial Times: "This will not happen as long as Jonny is in place," adding, "It doesn't fit with our plans to cut regulation."
'A misdirected idea'
The proposed changes were part of the º£½ÇÊÓƵ government's broader initiative to enhance transparency through the 'economic crime and corporate transparency act', enacted in 2023, which aims to combat fraud and shell companies.
Seb Wallace, the founder of Triple Point Ventures, warned City AM that the modifications could inadvertently drive individuals towards the grey market or even deter some founders from establishing their businesses in the º£½ÇÊÓƵ.
He criticised the proposal, stating, "It's a misdirected idea, a decision made by people who have obviously never run a business."
These apprehensions have been echoed by other investors. Chris Smith, managing partner at Playfair, cautioned that the disclosure of public revenue could provide large clients with disproportionate influence over small suppliers.
"Customers will see the percentage of revenue they are contributing to your company providing them with leverage to use against you – 'well, we can see that we are 60 per cent of your revenues so we'd expect a material discount at renewal'", he shared on Linkedin.
He further warned that rivals might exploit this information to undermine startups and SMEs, which could "stifle innovation if buyers have to favour strong P&L versus the optimal product".
In response to the decision to abandon the new regulations, Wallace commented: "This is a pragmatic decision at a time where small frictions need to be avoided.
"Other legislation, such as the Employment Rights Bill, also needs careful second order consideration if we are to ensure the º£½ÇÊÓƵ remains a competitive place to do business in the future."
