UK audit watchdog told to consider Britain's competitiveness in its work

By Huw Jones

LONDON (Reuters) - Britain's corporate governance and accounting watchdog should consider its impact on the country's competitiveness and growth when writing rules, business minister Kemi Badenoch said on Wednesday.

Britain is seeking to bolster the global clout of its financial sector, a key source of tax for the country, as it faces competition from New York for listings, and more recently from European Union centres following Brexit.

Following a backlash, the Financial Reporting Council (FRC) ditched much of a planned revamp of its Corporate Governance Code which listed companies must use on a 'comply or explain' basis.

"At a strategic level, in fulfilling its core purpose to enhance public trust and confidence in corporate governance, financial reporting and audit, the FRC should contribute to promoting the competitiveness and growth of the UK economy, embedding its growth duty across its work," Badenoch said in a letter to FRC CEO Richard Moriarty.

Moriarty said he welcomed the new remit for the FRC.

The Financial Conduct Authority and the Bank of England's Prudential Regulation Authority have both been given a similar competitiveness remit.

London Stock Exchange CEO Julia Hoggett has described the governance code as "comply or else", its lack of flexibility putting off investment in Britain.

Badenoch said proportionality of any new requirements was essential, and that it was also important to remove or streamline rules and guidance that were no longer proportionate.

"I would ask that you report back in a year’s time on the steps that the FRC has taken in promoting competitiveness and growth," she said.

The FRC's stewardship code of asset managers should also operate in a "flexible way", Badenoch said.

Moriarty said the priority was to complete the FRC's review of the corporate governance code, followed by a fundamental review of the stewardship code, ensuring they are proportionate and that any "unnecessary or disproportionate requirements are removed or streamlined".

(Reporting by Huw Jones; Editing by Andrew Heavens and Mark Potter)