Modernising Corporate Reporting: The government's “once-in-a-generation" review

On 7 September, the government opened its Modernising Corporate Reporting (MCR) consultation, a wholesale review of the UK's corporate reporting framework. The proposals cover financial and narrative reporting, corporate governance, remuneration and digital communications, and an update on sustainability disclosures, together amounting to a significant rethinking of the corporate reporting in the UK.

The government presents the review as a "common sense" reset and as a key part of its growth agenda. Ministers say the reforms will contribute to the commitment to cut administrative burdens by 25%, a central commitment of the Modern Industrial Strategy.

techUK's initial view is broadly supportive, and we believe the proposals could particularly benefit SMEs. The consultation runs for 12 weeks and closes on 30 November 2026. We will be responding and engaging directly with government, please see below for information on how to get involved.

A clearer purpose for reporting

The government proposes that the purpose of a corporate report should be to provide financially material, decision-useful information to investors and creditors, and that companies should be trusted to tell their own “business story”. Five principles guide the proposals: clarity of purpose; flexibility and trust; simplicity and coherence; proportionality; and fit for the future.

In practice, this means moving from a rules-based to a principles-based framework. Most existing strategic reporting requirements would be replaced by a core set of baseline disclosures covering business model, performance, resources and relationships, strategy and principal risks. The level of detail required would change depending on the size and complexity of the business.

Under the proposed financial reporting framework, detailed requirements would move out of company law and into accounting standards, which would be streamlined to four main standards.

What this means for UK businesses

For SMEs, the government is considering removing the distinction between small and medium-sized companies in corporate reporting, so that medium-sized firms can access a wider package of exemptions.

Notably, the government is considering extending the “small company audit exemption” to all SMEs (see page 26; excluding certain categories such as public interest entities and some financial services firms). A new voluntary assurance standard would be created, designed to give lenders confidence in SME accounts. Under the proposals, medium-sized firms could:

use a simpler SME accounting standard;
drop the cash flow statement;
skip consolidated accounts;
claim the audit exemption currently limited to small companies.

The government is also exploring whether company size could be measured using full-time equivalent employees rather than headcount, with the reasoning to better reflect contractor, agency and part-time models.

For larger companies, the government is testing whether a single 'very large' threshold should apply to non-financial reporting and proposing lighter governance and remuneration reporting. Other proposals include:

moving corporate governance reporting to group level;
publishing some governance information on company websites only;
for quoted companies, removing the annual advisory vote on the directors' remuneration report, along with disclosures such as the CEO-employee pay ratio.

The government is also asking whether private companies, which often have close relationships with their investors, need the same non-financial reporting as listed companies at all. Additionally, they are proposing a new ‘very large’ company category for certain non-financial reporting obligations.

Transition plans and SRSs

The government is considering responses to its earlier consultation on transition plans, and that future decisions will have regard to the objectives and context of this wider review of corporate reporting.

For ESG reporting, explicit disclosure requirements on environmental, employees, social and community, human rights and anti-corruption are proposed to be removed from the legislation, although companies would still be expected to report on these topics where they are financially material, and would “not be prevented” from using frameworks such as UK Sustainability Reporting Standards (SRSs) or the Taskforce for Nature-related Financial Disclosures (TNFD). Additionally, existing climate-related financial disclosure (CFD) requirements would remain unaffected by these proposals.

In terms of the UK SRSs (S1 and S2), the government will consider how should be reflected by taking into consideration feedback from this consultation and the CFD post-implementation review (expected to conclude by spring 2027). The Financial Conduct Authority (FCA) recently consulted on requiring listed companies to disclose climate-related risks and opportunities in accordance with UK SRS S2 – final listing rules were expected to be published in autumn 2026, although this may be delayed until after the MCR concludes. It is also worth noting that the government supports the financial materiality approach taken by the ISSB, as opposed to the EU Corporate Sustainability Reporting Directive (CSRD) “double materiality” approach.

Streamlined energy and carbon reporting (SECR) disclosures are proposed to be moved to any section of the first half of an annual report; the Department for Energy Security and Net Zero (DESNZ) plans to hold a separate consultation on SECR and the Energy Savings Opportunity Scheme (ESOS) reform later this year.

Note: techUK responded to the FCA consultation, please contact Elisabeth to see our response.

Cyber risk

Contrary to the rest of the consultation, the government is asking whether investors need more reporting, including asking whether 'very large' companies should be required to report on how directors manage cyber security risks, and whether existing risk reporting – mainly through the UK Corporate Governance Code and the voluntary Wates Principles – already generate enough useful information on cyber risk for investors and creditors (see Q29).

Embracing technology in reporting

The consultation acknowledges that much of the current framework was designed for a paper-based world, and that the Companies Act 2006 has become “analogue in a digital world”.

The proposals include a presumption in favour of digital communications with shareholders, as well as:

making electronic communication with shareholders the default;
clarifying that AGMs can be held fully virtually where shareholders consent;
testing whether some disclosures could move to company websites or central reporting portals, so that information can be updated and compared outside the annual reporting cycle;
giving the FRC statutory powers to set iXBRL tagging standards, with directors signing off digital formatting earlier and auditors reporting on it.

Further, the consultation covers more emerging technologies, with the government planning to review how corporate reporting can adapt and adopt AI, new advanced analytical tools, and central reporting portals, explicitly recognising that AI is already being used to both draft and consume corporate reports (61% according to an FRC-commissioned survey). It asks how respondents expect new technologies to change the way reports are used, and which digital technologies the reforms should consider (Questions 45–54).

When analysing reports with AI, the consultation identifies that some stakeholders argue that results are often more accurate when information is digitally tagged, while others suggest that rapid improvements in AI and data-mining tools mean there will soon be the capability to extract insights from traditional formats (like PDF reports), without the need for extensive tagging – therefore, government is inviting views (particularly from technology experts) on whether there should be mandatory tagging requirements for reports and accounts.

The global context

The government's proposed purpose for reporting, focusing on investors and creditors, aligns closely with the IFRS Foundation's definition of the primary users of general-purpose financial reports.

In the EU, following the Omnibus I package, the CSRD now applies only to companies with more than 1,000 employees and net turnover above €450 million. This removes around 90% of companies that were originally expected to report, and cuts mandatory European Sustainability Reporting Standards (ESRS) data points.

The UK's direction of travel is therefore consistent with a broader international move towards simplification; however, for companies operating in multiple jurisdictions, interoperability matters as much as burden reduction, and companies should note that the UK's proposed exclusions from its reporting exemptions currently go further than those in the EU. A new Reporting Gateway within BIST will scrutinise all future reporting proposals, and international alignment is one of its explicit criteria.

Get involved

techUK is hosting an informational webinar with officials from the Department for Business, Innovation, Science and Trade (BIST) on Thursday 8 October 2026, from 11am to 12pm.

To share your views or be kept up to date on our response, please contact Elisabeth Sullivan (elisabeth.sullivan@techuk.org) or Craig Melson (craig.melson@techuk.org).