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SME Market Study information sheet

SME Market Study

In February 2025, the Financial Reporting Council (FRC) launched its market study examining how effectively the audit market serves small and medium-sized enterprises (SMEs) and exploring opportunities to reduce their reporting burden where possible.

SMEs form a significant part of the UK economy representing more than 99% of the private sector business population. They employ around 16.6 million workers and have a shared turnover of £2.75 trillion, 52% of the shared total. SMEs drive economic growth across all regions and communities of the UK through innovation and job creation.

SMEs require access to capital to build and scale, and the provision of this capital is often dependent on having audited accounts. The FRC is aware of potential issues associated with reporting and audit requirements that may result in additional burdens on SMEs and impact on the supply of, and resulting access to, audit services.

SMEs differ by size, type, complexity and activity, therefore this market study will focus on the challenges faced by SMEs in relation to access to audit as well as reporting requirements, better understanding the decision-making process for SMEs who procure audit services when otherwise exempt, and identifying where practitioners face possible challenges in auditing SMEs.

Areas of focus

  • How the audit market is working for SMEs, including any burdens arising from reporting and audit requirements
  • Market forces driving the consumption of audit services by SMEs
  • Challenges auditors experience when auditing SMEs
  • Forthcoming market, legislative or regulatory developments which the FRC should be considering as part of the study

Why has the FRC launched this Market Study

As the Competent Authority for all audit, and the regulator responsible for overseeing professional bodies, one of the FRC's priorities to support economic growth is to understand the markets we oversee to identify whether they work effectively to support UK companies growth.

This includes any unnecessary burdens arising from reporting and audit requirements (and their application), and the market forces which are driving the consumption and associated costs of audit services by SMEs.

This study is the first phase of the FRC's broader campaign to support UK SMEs access audit services and secure the capital they need to grow.

The study will contribute to further work which the FRC undertakes to support the proportionate application of audit standards to SMEs, and provide a deeper understanding of the role of audit standards in the effective functioning of capital markets.

How to take part

This market study is being carried out on a voluntary basis. Stakeholders taking part in the market study will have the opportunity to develop the FRC's understanding of the market and feed into our approach to future work to support the audit of SMEs.

The FRC is keen to hear from those organisations and individuals involved in this market including:

  • SMEs and their advisers
  • capital providers to SMEs
  • auditors who provide services to SMEs
  • professional bodies.

Submit a written response to the market study

Get in contact to take part in the FRC's SME market study: [email protected]

FRC campaign to support UK SMEs to grow and scale

  • Market study examining issues affecting SMEs including audit and reporting requirements
  • Guidance to support the proportionate audit of SMEs
  • Support materials for SMEs

File

Name SME Market Study information sheet
Publication date 18 February 2025
Type Information sheet
Format PDF, 1.9 MB
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