FRC chief to stand down amid “pivotal” time for audit reform

Sir Jon Thompson’s resignation as CEO of the Financial Reporting Council (FRC) poses a further threat to the momentum of audit and corporate governance reform in the UK, market participants have warned.

“The whole reform process has dragged on too long already,” said Mike Suffield, director of policy and insights at ACCA.

Suffield argued that the audit reform agenda faces a “pivotal time”, noting that the search for a new FRC chief coincides with the appointment of Kemi Badenoch as Secretary of State for the Department of Business and Trade (DBT).

“It’s crucial that progress is made quickly under this new leadership, on introducing legislation to give effect to the Government’s proposals for reform of corporate governance and audit in the UK.”

The Department for Transport announced on Thursday that Thompson is to become the new chair of the HS2 high-speed rail link project with immediate effect. He will retain the top job at the FRC in a part-time capacity for the duration of his six-month notice period.

FRC chair Sir Jan Du Plessis confirmed in a statement that collaboration with the DBT to find a replacement will begin immediately.

‘An important stage’

“This remains an important stage in the development of the FRC and its capabilities as an impactful and influential regulator,” the statement added.

Thompson’s departure coincides with growing frustration around persistent delays to the planned overhaul of the UK’s audit and corporate governance regime.

The formation of ARGA, a new audit regulator, considered to be the lynchpin of the reforms, was first suggested as part of the government-commissioned Kingman Review published in December 2018.

A full package of reforms was published for industry consultation in 2021, and finalised over a year later in May 2022. However, the final proposals were considered to have been significantly watered-down, and little has been done in the aftermath to enshrine the policies into law.

Agitation among stakeholders is likely to intensify as a lack of leadership threatens to further destabilise the transition process.

Thompson’s “tremendous” tenure

ACCA’s Suffield went on to further lament the FRC chief’s “sad” exit, praising the civil servant’s “tremendous” efforts since his 2019 arrival.

Having previously ran HMRC and served as permanent secretary at the Ministry of Defence, Thompson was drafted in to rescue the FRC from crisis.

A 2018 government-commissioned review described the audit regulator as a “ramshackle house”, with its grip on the sector being called into question following the now-infamous collapses of BHS and Carillion.

Thompson’s tenure saw the FRC adopt a toughened stance on poor-quality audit work, in addition to roughly doubling its workforce to more than 400.

His official appointment as HS2 chair follows years of involvement with the project. He has served as a non-executive director since 2021, became deputy chair early in 2022, and has been acting as interim chair in recent months.

Thompson will be expected to stabilise the multi-billion-pound initiative after years of delays and budget discrepancies.