UK regulators allow companies time to consider COVID-19 impact

As this is a fast moving topic, please note that this article is current as at 25/03/20. For further information, please contact John BruceJennifer KusiakChris Marangou.

With COVID-19 continuing to cause colossal economic uncertainty, UK regulators have introduced measures and issued guidance to ensure that companies fully consider the potential impact of COVID-19 on their business.

FCA requests reporting delay

The Financial Conduct Authority (FCA) has asked around 40 listed companies that were due to publish preliminary financial statements this week, to delay their planned publications for a period of at least two weeks.

The FCA’s move is to allow companies sufficient time to adjust figures for the impact of the COVID-19 pandemic on their business activities and reflects the “unprecedented practical challenges” these companies, and the audit profession, face in light of the crisis.

Currently, issuing preliminary financial statements is not required by either the UK’s Listing Rules or Transparency Directive, but is a common practice amongst UK companies. The FCA’s request seeks to avoid companies rushing to publish preliminary financial statements, without adequate consideration of the changing economic and political landscape, and to instead use the full time available to them in the Listing Rules to publish full audited financial statements.

It is reported that the announcement was prompted by the preliminary results recently published by Next, the clothing retailer, which recorded a 3.3% rise in full-year revenue, but a 30% decline within three days of the period end, following the serious impact of the pandemic on shopping activity.

The moratorium is voluntary and dependent upon a determination by company boards of the extent to which the crisis impacts upon it and whether delay in publishing is necessary to ensure due consideration is given to accurate disclosure. At present, it relates to preliminary results only and does not extend to other corporate reporting. The Market Abuse Regulation remains in full force and announcements to the market about inside information are still required.

At this stage, there is no change to the four month deadline from financial year-end for publishing audited accounts, although Companies House has advised that it is likely to grant those who apply, an extension to file company accounts.

FRC advice on risk disclosure

The Financial Reporting Council (FRC), which regulates auditors, also recently published guidance for companies on the disclosure of principal risks and other reporting consequences arising from COVID-19.

While the guidance focusses in particular on operational exposure in China, given the rapid spread of the virus globally, it is crucial for all businesses to consider the impact of COVID-19 on their disclosure obligations, in particular principal risks and asset and liability valuations. Depending upon the relevant reporting date, year-end balances may also be affected. We expect that companies and their auditors will face increasing practical difficulties in assessing these key reporting matters, in the face of the extraordinary conditions imposed by the pandemic.

Other measures

In addition to the moratorium on publishing preliminary financial statements, UK regulators, including the Bank of England (BoE), the Prudential Regulation Authority (PRA) and the FCA, have taken steps to relieve the burden on financial service providers and their own staff, as social measures to deal with the crisis take effect, making routine tasks more difficult and time consuming. These include cancelling or postponing “non-critical” regulatory work, such as cancellation of the banks’ 2020 annual stress test.

The BoE, the PRA, the FCA and other authorities have also agreed that the first meeting of the newly-created Financial Services Regulatory Initiatives Forum will take place as soon as possible in April 2020. The authorities intend that the publication of the Regulatory Initiatives Grid after that meeting will ensure that industry has full sight of a co-ordinated future work plan as early as possible in the light of COVID-19.


The pandemic has created an unprecedented and rapidly changing environment in just about every aspect of business and regulation. Stock markets have tumbled as investors dump shares in companies they expect to be badly affected by the pandemic. It is critical for boards to come to terms with this unique landscape and closely monitor how it might impact upon their business activities, to ensure they are providing up-to-date and meaningful disclosures to their shareholders, in particular when preparing year-end reports.  Failure to do so could give rise to shareholder actions against boards as well as regulatory investigations by the FCA and the FRC.  

UK regulators are co-ordinating to introduce measures to ensure that companies take the necessary time to prepare appropriate disclosures and address current practical challenges. A package of measures arising from talks between the FCA, the FRC and the PRA is expected to be announced shortly.

We will keep you updated as developments arise.

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