Seb Wallace, Head of Triple Point Ventures and a founder himself, comments on new legislation that risks harming UK growth businesses by requiring small companies to publicly disclose profit and loss accounts.
“If the UK is serious about supporting growth and a competitive business environment, it’s important that legislation does not inadvertently hinder the innovation it seeks to promote. The latest implementation step of the Economic Crime and Corporate Transparency Act risks doing exactly that.
While reducing fraud is important, there is no clear evidence that making small companies’ P&L statements publicly available prevents fraud, whilst disclosing those for early-stage businesses could have unintended consequences. Prospective or actual clients of small businesses use such data to exert pricing pressure, undermining companies’ commercial viability, when they are at their most vulnerable.
The proposal risks discouraging entrepreneurship and accelerating the trend of UK-incorporated companies looking abroad. In jurisdictions such as Delaware, USA – arguably the most successful global hub for company formation – corporate accounts are deliberately not made public, which helps reinforce vibrant business growth.
While fraud is an important issue, this particular measure carries more downside than benefit, and could ultimately penalise young businesses at a time when growth should be prioritised.”
