A leading business organisation has slammed the latest news from the Government that hopes to save small businesses around £40 million per year by doing away with the need to produce audited accounts.

Far from helping small businesses, the move is more likely to damage a company’s access to credit therefore restricting growth and in fact adding to their costs says Philip King, Chief Executive of the Institute of Credit Management (ICM).

“The Government needs to get away from this idea that reducing red tape will always mean reducing costs to small businesses,” he says. “Businesses extend credit to one another based on the trust that comes from knowing that the company is financially viable, and one of the essential proof points is a set of audited accounts.

“Banks too look to lend on the basis of sound financial data, so limiting the amount of financial information available will do more harm than good,” he says.

Mr King also believes it increases the likelihood of fraud: “The Government must stop sending mixed messages,” he says. “If they want small businesses to drive the economy, this is not the way to do it.”

In the release from the Department of Business, Innovation and Skills (BIS), the Business Secretary said: “It’s important that we free small firms up so they can grow and drive the economy. The changes mean that small firms will be able to concentrate on growing and taking on more people instead of paperwork.”

The Government said that it was looking to take action in certain areas where audit and account rules were stricter in the UK than required by EU law.

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