Consultation on non-financial reporting by medium-sized companies

The Department for Business & Trade has launched a consultation on exempting medium-sized companies from preparing a strategic report as part of their annual report and accounts, following the call for evidence it launched in May 2023 on non-financial reporting. The consultation also seeks views on increasing the maximum number of employees that a company can have in order to be 'medium-sized' from not more than 250 to not more than 500 employees.

The government launched the non-financial reporting call for evidence in recognition of the fact that companies’ reporting requirements have expanded over time, increasing the size and complexity of annual reports. For further details on the call for evidence and government response published in March 2024, see our blog post here.

The consultation paper also gives further details on the other steps planned to streamline non-financial reporting that were outlined in the March 2024 government response:

• Monetary thresholds – the government intends to introduce legislation in summer 2024 to raise the monetary threshold used for the classification of companies as large, medium or small by 50%. The consultation paper spells out that this would mean, for example, to be 'large' a company would need to meet two of the following: turnover of £54 million+ (up from £36 million); balance sheet of £27 million+ (up from £18 million); and, subject to the outcome of this consultation, 500+ employees (up from 250);

• Directors' report – the legislation will also remove certain disclosures currently required in the Directors’ Report and the Directors’ Remuneration Report. The consultation paper lists the following reporting requirements as those that are expected to be removed, for all companies, from the Directors' Report: the use of financial instruments, important events affecting the company since the end of the financial year, likely future developments in the business of the company, the research and development activities of the company, branches of the company outside the UK, employment of disabled persons, engagement with employees and engagement with suppliers and customers; and

• Energy and other reporting requirements – the government does not intend to change the threshold for streamlined energy and carbon reporting until it has undertaken more analysis. There are also other reporting requirements with separate tests dependent on status as well as size, for example quoted companies or public interest entities, which will not be impact by the change in thresholds.

The consultation closes on 27 June 2024.