The UK Government has scrapped its long-anticipated Audit and Corporate Governance Reform Bill, concluding that the planned measures would be too costly for large businesses.

The move comes shortly after the eighth anniversary of Carillion’s collapse, an event that had intensified pressure for significant changes to the audit and corporate reporting regime.

Confirmation that the bill has been scrapped was included in a Department for Business and Trade (DBT) announcement on investment in UK technology sectors and further steps in its drive to cut regulation as part of a wider push to reduce “red tape”.

The proposed legislation had been expected to introduce a new definition of public interest entities, tighten directors’ accountability for existing reporting responsibilities and set up a new regulator with enhanced powers.

The DBT said the decision to scrap the bill was taken to “avoid significant new costs” for major organisations.

Additional detail is set out in a letter from Blair McDougall, Minister for Small Business and Economic Transformation, to the Chair of the Parliamentary Business and Trade Committee.

McDougall wrote that, with the government’s main focus on supporting growth and reducing administrative burdens, it would “not be right” to prioritise measures that would increase costs for companies.

“We intend to focus instead on the simplification and modernisation of corporate reporting. We want to make the UK’s reporting regime the most streamlined and proportionate in the world,” he said.

He also cited what he described as improvements in audit quality and regulation since Carillion’s collapse as another factor behind the decision to change course.

Reacting to the news, Institute of Chartered Accountants in England and Wales (ICAEW) CEO Alan Vallance said: “We cannot hide our disappointment that after many false dawns, the government has decided to scrap the Audit and Corporate Governance Bill.

“The government had itself recognised that an Audit Reform Bill would increase global investor confidence in UK companies and increase the prospects of growth.”

Vallance continued: “The final piece in the puzzle is to give the FRC [Financial Reporting Council] as regulator all the tools it needs to carry out its job. We offer to continue to work with the government, the FRC and firms to ensure these specific powers are granted and that the UK is the best place in the world to attract global investment.”

McDougall’s letter indicates that movement will be made in this area.

“I am committed to continued support of the measures taken by the FRC and the audit sector to achieve these improvements… Nevertheless, it remains important to have effective, proportionate regulation of audit and a regulator that has the right legislative set-up to do the job.”