Draft regulations that would have beefed up corporate reporting requirements for business have been abandoned at the 11th hour, in a major setback to improved corporate transparency and trust.

The government announced on Monday that it had withdrawn draft regulations after consultation with businesses raised concerns about imposing additional reporting requirements to large UK listed and private companies.

The legislation was put forward by the government just three months ago and proposed measures including the introduction of an annual resilience statement, distributable profits figure, material fraud statement and triennial audit and assurance policy statement. The corporate governance legislation would have applied to public and private companies with at least 750 employees and annual turnover greater than £750m.

Parliament was due to debate the draft legislation on Tuesday. However, the business department now says it will “pursue options to reduce the burden of red tape” to ensure the UK is one of the best places in the world to do business.

Iain Wright, ICAEW Managing Director, Reputation and Influence, described the decision as “a major blow to those seeking to drive improved transparency and trust in UK corporate reporting”.

“Ensuring the UK’s legislative framework is fit for purpose and sufficiently clear and robust to allow for future developments is vital if the UK is to retain its reputation for corporate transparency,” he said. “So it is a surprise and disappointment that the government is abandoning needed new statements to boost corporate transparency on resilience and other key matters.

“The measures set out in the draft regulations, while not perfect, were the product of extensive due process and consultation. Their withdrawal appears to signal an end to the UK process of audit and corporate governance reform initiated after the demise of Carillion, and it is to be regretted.”

The government says it remains committed to wider audit and corporate governance reform, including establishing a new regulator, the Audit, Reporting and Governance Authority (ARGA) to replace the existing Financial Reporting Council. “We will bring forward legislation to deliver these reforms when Parliamentary time allows,” it said in a statement.

Business Minister Kevin Hollinrake said engagement with businesses and stakeholders since publication of the draft regulations in July had highlighted a strong appetite for existing reporting requirements to be simplified.

“This will deliver a more targeted, simpler and effective framework for both business and investors, reinforcing that the UK is one of the best places in the world for firms to list and to do business. This move will form part of a wider package of reform from the government to streamline and simplify regulation for businesses.”

Julia Hoggett, CEO, London Stock Exchange Plc, said: “Good corporate governance should be an enabler for companies to grow and reach their full potential in the interests of all stakeholders. However, founders, company boards and, increasingly, shareholders have highlighted that the UK’s approach of ever-increasing corporate governance processes has, however well-intentioned, impacted the effectiveness of listed companies and the standing of the UK over other capital markets.”

Hoggett said releasing listed companies from the proposed additional reporting burdens is another step toward the level playing field. “If companies are to have the certainty they need, it is vital that this reform and steps to enhance the competitiveness of the UK are backed by political consensus.”

Earlier this month, the government launched a 12-week call for evidence to review all regulators across the UK, in a campaign to bring about smarter regulation and make companies’ lives easier. The government says it follows concerns by business that regulators are overly risk averse and focus too heavily on process at the expense of delivering the best outcomes.

Meanwhile, the Department for Business and Trade (DBT), working with FRC, is conducting a review of the non-financial reporting requirements UK companies need to comply with to produce their annual report and to meet broader requirements that sit outside of the Companies Act. The review will also consider if current company size thresholds that determine certain non-financial reporting requirements, and the preparation and filing of accounts with Companies House, remain fit for purpose.