The content on this page has been converted from PDF to HTML format using an artificial intelligence (AI) tool as part of our ongoing efforts to improve accessibility and usability of our publications. Note:
- No human verification has been conducted of the converted content.
- While we strive for accuracy errors or omissions may exist.
- This content is provided for informational purposes only and should not be relied upon as a definitive or authoritative source.
- For the official and verified version of the publication, refer to the original PDF document.
If you identify any inaccuracies or have concerns about the content, please contact us at [email protected].
Annual Plan and Budget: 2025-26
The FRC does not accept any liability to any party for any loss, damage or costs howsoever arising, whether directly or indirectly, whether in contract, tort or otherwise from any action or decision taken (or not taken) as a result of any person relying on or otherwise using this document or arising from an omission from it.
The Financial Reporting Council Limited 2025 The Financial Reporting Council Limited is a company limited by guarantee. Registered in England number 2486368. Registered Office: 13th Floor, 1 Harbour Exchange Square, London E14 9GE
1. Introduction
Our plan and budget for 2025-26 is aimed at consolidating the purpose of our organisation
The purpose of the FRC is to serve the public interest and support UK economic growth by upholding high standards of corporate governance, corporate reporting, audit and actuarial work.
With an increased focus on the general health of the UK and global economy, the FRC aims to consolidate our purpose with the emphasis the government has placed on regulators to support UK growth and investment. Although this link previously existed in our work, this coming year we aim to make it more explicit in everything we undertake.
To build on the progress we have made in recent years, the FRC will continue to anticipate the challenges and opportunities in the markets we regulate and adapt our approach of being a modern and agile regulator. A number of contributions to our regulatory evolution are on our agenda for the coming year, such as our Future Audit Supervision Strategy (FASS) project and our End-to-End enforcement review (E2E). The aim is to ensure our processes continue to be efficient, effective and proportionate, and encourage improvement and high-quality standards.
We continue to welcome the government's commitment in the King's Speech in July 2024 to bring forward draft legislation to reform and modernise the FRC's statutory authorities, powers and regulatory perimeter. This future change will help us more effectively meet our purpose and ensure our work is focused on the public interest, reinforced with a clear statutory basis.
Financial Reporting Council's work helps to underpin trust and confidence in companies from a range of stakeholders, such as investors, creditors and employees and the communities in which they operate. The FRC recognises that our stakeholders want and need to understand the public interest outcomes we are striving to achieve and how we measure success. As well as our operational performance measures on page 12, we have set out in our strategy various market health indicators (MHIs) on which we will also start to report.
We are mindful of the general economic environment and we continue to aim to avoid unnecessary increases in our charges to levy payers. Although our employment costs have risen by about 6% as a result of the public sector pay remit and changes to employer National Insurance Contributions (NICs), we will seek efficiencies in the year and keep our headcount flat so our budget will rise broadly in line with inflation at 3% (and remain broadly the same in real terms as the previous year).
The FRC looks forward to another year of enhancing our engagement with our stakeholders as we consolidate and develop our core public purpose.
2. Delivering in 2025-26
In our 2025-28 strategy we describe the themes most relevant to the three-year period and the high-level stakeholder outcomes to which we contribute. We also describe our strategic objectives for 2025-28.
In 2025-26, our resources will be focused on the following activities linked to each of the strategic objectives:
Objective 1
The standards and expectations we set will enhance corporate governance, corporate reporting and investor stewardship in a manner that supports UK economic growth and investment.
- Work with corporates to embed successfully the recent update to the UK Corporate Governance Code in relation to internal controls, focusing our engagement in particular on Provision 29 and partnering with our Corporate Reporting Review (CRR) team to monitor reporting.
- Ensure our review of the Stewardship Code for asset managers, asset owners and investment service providers supports high-quality investor stewardship and UK economic growth, while reducing unnecessary burdens, by introducing a streamlined assessment and monitoring process.
- Bring in-house our work on monitoring the adoption of the Wates Principles that apply to privately owned businesses.
- Deliver our statutory Corporate Reporting Reviews remit as well as monitoring climate risk disclosures in collaboration with the Financial Conduct Authority (FCA) and carry out a sample of reviews of corporate governance disclosures.
- Maintain the accounting standards we set that apply to those three million businesses that follow UK GAAP and, as an organisation, facilitate the independent decision-making of the UK Endorsement Board, for the endorsement of international accounting standards through our due process oversight function.
- Ensure our actuarial regulation supports high standards in public interest actuarial work and is risk-based and proportionate, by supporting the implementation of revised AS TM1 as Pensions Dashboards are introduced.
- Support the Department for Business and Trade (DBT) with its work on the Non-Financial Reporting Review and revise our guidance on the Strategic Report.
- Deliver a UK standards response to the finalisation of international standards on sustainability engagements.
- Extend our performance standard for client assets in response to changes to the FCA rulebook in respect of e-money safeguarding.
- Revise/withdraw Standards for Investment Reporting in response to changes in the UK Listing Rules and Prospectus Regime.
Objective 2
Our proportionate regulation of accounting, audit, assurance and actuarial work will expect and encourage high quality by those responsible, acting as an improvement regulator and dealing effectively and fairly with cases where there are significant or serious shortcomings.
- Deliver a programme of risk-based and random-sample, high-quality Audit Quality Review (AQR) inspections, FRC Ethical Standard and International Standard on Quality Management (ISQM) work programmes.
- Assess the culture, governance and risk and resilience of the largest audit firms, including their operational separation arrangements (where applicable). Embed our Audit Market Monitoring function in its second full year of operation.
- Conduct our business-as-usual approval and registration of audit firms and Responsible Individuals who undertake Public Interest Entity (PIE) work.
- Continue to supervise the effectiveness of the professional bodies in their approach to non-PIE audit inspection and regulation, embedding our risk-based supervisory approach.
- Implement changes to our supervision of smaller audit firms to create a more proportionate inspections approach.
- Prioritise our FASS project, which will undertake a comprehensive review of how the Audit Supervision regulatory model should evolve to respond to challenges and emerging issues. There will continue to be a need for robust inspection and for the FRC to shine a light on, and report on, the performance of firms for public and investor interest. However, we will also increasingly leverage the tools that already exist to enable firms to take greater ownership and accountability of their continuous improvement journey, such as their own systems of quality control and assurance (ISQM1). We will seek views from stakeholders with targeted outreach in the spring and followed by a second period of engagement in the autumn focusing on an updated set of proposals.
- Engage with international partners and standard-setting bodies to influence how audit, ethical and independence standards are developed and ensure alignment with UK requirements. For 2025-26, this will include the UK adoption of International Standards on Auditing (ISAs) on fraud and going concern.
- Use our Scalebox initiative to work with smaller audit firms to help share best practice and develop their capacity and capability.
- Undertake effective, fair, proportionate and timely investigations and apply sanctions where there are cases of serious or significant failings by firms or individuals.
- Review, consult on and refresh our end-to-end enforcement processes and procedures, from initial case assessment to publication of outcomes, considering governance structures, decision-making processes and operational efficiency and effectiveness (including approaches adopted by analogous independent regulatory authorities). The aim is to ensure these continue to be efficient, effective and proportionate (including in terms of offering a graduated range of regulatory responses). This is known as our E2E project.
Objective 3
We will build on our deep understanding of corporate reporting and the audit and actuarial markets we oversee, and by being agile, we will identify and prepare for opportunities and challenges on the horizon.
- Understand how Artificial Intelligence (AI) will impact the audit and actuarial markets and what this means for setting standards, our guidance and regulation.
- As Companies House progresses the government's reforms to company registration and filing, we will work closely with them and other partners to deliver taxonomies and a regulatory approach that recognises the growing importance of reliable digital reporting quality.
- Provide the secretariat and specialist advice to the government's new UK Sustainability Technical Advisory Committee (TAC) for the endorsement of international standards related to sustainability reporting, supporting DBT in its consultations on this, the market and a potential framework for assurance on sustainability disclosures.
- Understand how the audit market works for Small and Medium sized Entities (SMEs) by undertaking a market study and develop guidance to encourage auditors to apply the ISAs (UK) in a proportionate and scalable way.
- Understand the impact of our regulation on the audit market and commercial incentives by firms.
- Broaden and refresh our Sandbox initiative to pilot and trial new and innovative approaches to audit, assurance and reporting, under dedicated senior leadership.
- Develop an appropriate approach for the prospect of greater participation by private capital in the ownership of UK audit firms.
- Use our international influence to develop agreements with other countries enabling mutual recognition of audit qualifications and experience that provides global opportunities for UK auditors and expands the pool of qualified auditors able to undertake statutory audit work in the UK.
- Work with the professional bodies and firms to understand the opportunities and challenges for the future of the audit and actuarial professions.
Objective 4
We will be a modern organisation – continuously learning, improving and considered by others as a respected, effective and highly engaged regulator and by our colleagues as an inclusive and great place to work.
- Ensure we engage well with those affected by, or with an interest in, our work. During 2025-26, this will be particularly relevant for our FASS and E2E projects and in supporting DBT's own consultations on future legislation and regulation, including on streamlining reporting requirements.
- Develop a people strategy to ensure we recruit, retain and develop the necessary skills, experience and values to implement our strategy and meet our objectives.
- Exploit modern data and information management practices. We will undertake a project to further reduce our reliance on external database providers and introduce greater automation of our data gathering exercises.
- Continue to upskill to keep pace with developing areas, such as AI use and sustainability reporting, and deliver Phase 2 of our bespoke Enforcement training programme to deepen expertise and support consistency.
- Work alongside government to develop new legislation to reform and modernise our statutory authorities, powers and regulatory perimeter as announced in the July 2024 King's Speech to Parliament. This will help address the significant statutory gaps first identified by Sir John Kingman's review in 2018.
- Embed our office location strategy following the move from our current single City of London office building to a dual-site model, with a new London office building in the Canary Wharf area and an expanded presence in our new central Birmingham office building.
3. Operational requirements
We experienced a significant period of growth between 2018 and 2023, as we addressed the recommendations of the 2018 Kingman report and pursued a transformation agenda to ensure we were respected by stakeholders as an effective regulator. In 2024-25, we paused to assess progress and reprioritise our resources. We planned to hold our headcount flat at the forecast figure for March 2024 of 506. We purposefully did not did not recruit to our full budgeted figure during 2024-25. We expect to end the 2024-25 financial year with 471 people; 452 full time equivalents (FTEs) compared with the budgeted numbers (506 people; 486 FTEs). The following table compares our budgeted numbers for March 2025 and March 2026, showing our planned reduction in budgeted headcount.
| Division | March 25 budget | March 26 budget | March 25 budget FTE | March 26 budget FTE |
|---|---|---|---|---|
| Regulatory Standards | 83 | 70 | 81 | 67 |
| Supervision | 200 | 190 | 189 | 181 |
| Enforcement | 78 | 68 | 75 | 64 |
| Corporate Services | 85 | 50 | 82 | 49 |
| SGSE division1 | 30 | 72 | 30 | 71 |
| Total FRC | 476 | 450 | 457 | 432 |
| UK Endorsement Board | 30 | 30 | 29 | 30 |
| Total | 506 | 480 | 486 | 462 |
To absorb new or additional work within our headcount in 2025-26 we continue to look at ways we can be more agile, responsive and efficient with our resources in line with objective 4, above.
Annexe 1 contains a detailed breakdown of our expenditure and funding requirements needed to deliver the priorities described in section 2, above. Overall, the combined budgeted cost of the FRC and the UKEB for 2025-26 will be £72.3m (2024-25 budget: £71.5m). The budgeted cost is £1.7m lower than shown in our draft budget. This reflects the transfer of the FRC's local audit system leadership responsibilities back to the Ministry of Housing, Communities and Local Government (MHCLG) – reducing the budget by £1.6m, and efficiency savings of £0.1m. Our overall budget for 2024-25 excluding the cost of our local audit responsibilities was £69.8m. Our budget for 2025-26 therefore represents an increase of 3.5% in cash terms.
Despite an unexpectedly high public sector pay settlement, our forecast outturn for 2024-25 excluding local audit is £67.1m, due to a deliberate rephasing of recruitment and expenditure during the year. Against this forecast, our proposed 2025-26 budget represents a nominal increase of 4%. Our budget has also been impacted by the change to employer's NICs from April 2025, so to keep our overall 2025-26 budget increase as close to inflation as possible we have also sought savings in non-staff costs. These savings are partially offset by unavoidable contractual increases in some places.
It should be noted that each year our budget contains an assumed figure for enforcement case costs, net of case cost recoveries awarded. The actual amount can differ significantly in years when we receive high cost awards, such as 2023-24. These cost awards do not necessarily relate to cases concluded in that financial year.
Our people
To demonstrate our role as a modern regulator, we employ a highly professional and experienced workforce that uses its expertise to guide and develop the evolution of the sectors we regulate and oversee. Over the past financial year, we have implemented a period of headcount consolidation as we have sought to restructure parts of the organisation and encourage more cross-functional working. This approach also reflects our response to recent economic pressures and our intent to maintain an agile workforce. During 2025-26, we will retain this approach and build on the opening of our new office in Birmingham. There are currently 41 people (8.6% of our total headcount) based there, and we will continue our approach of aiming to recruit all new hires into Birmingham as we seek to achieve a 50/50 split between the two offices.
It is important to us that we create an organisational culture in which the Birmingham and London offices are seen to be equal in importance, with colleagues working seamlessly together between the two. Over the next year, we will be looking to increase our Board and Executive Committee engagement, with plans to host meetings in Birmingham for the first time.
In London, the 2025-26 financial year will be focused on establishing our presence in our new offices in the Canary Wharf area, a vibrant environment close to many of our government, regulator and industry stakeholders. With a dual-location structure complete, we will retain our hybrid working policy, and consider how we can leverage the opportunities of two offices to enrich the FRC's culture and working practices. We will continue to report on the progress made in consolidating the office moves until we reach the intended 50/50 employee split between London and Birmingham.
We will continue to invest in the professional development of our people, building on our culture of learning and talent development across the organisation. In particular, we will focus on building resilience and understanding of the use of online tools to reflect the developments in the market we regulate or oversee, and build on our existing systems to explore longer-term synergies.
Influential
Through technical expertise and thought leadership, our people innovate to drive change. They develop themselves and others, speak up, value diversity and support others to do the right thing.
Fair
Our people act in a professional, proportionate, consistent manner to ensure robust standards of decision-making and delivery, both internally and externally.
Independent
Our people challenge ideas, make evidence-based decisions and always act with integrity.
Effective
Our people are decisive, accountable and collaborative when working with others to share information and experiences to improve outcomes.
4. Risks and challenges
In our Annual Report and Accounts, we provide a comprehensive review of our principal risks and the effectiveness of our risk management framework over the past year. Below we set out how our planned activities for 2025-26 address these risks.
| Principal risk | Key mitigating activities |
|---|---|
| Due to a lack of proactivity, responsiveness or consideration of stakeholder impacts (cause), the FRC fails to manage evolving political and stakeholder expectations (event). This results in a loss of trust in corporate governance, standard setting, corporate reporting and audit quality and/or undermines our ability to contribute towards our growth duty (effect). | Continuing to embed our growth duty in all our work. Ensure we engage well with those affected by, or with an interest in, our work. Streamline our Stewardship Code assessment and monitoring process. Support DBT with draft legislation. |
| Due to insufficient investment, focus or introducing unjustified divergence (cause), the FRC fails to effectively influence and implement domestic and international accounting, audit and actuarial standards and expectations (event). This results in unnecessary cost to participants in the ecosystem and risks undermining the quality of information supporting decision-making in financial markets (effect). | Deliver a UK standards response to the finalisation of international standards on sustainability engagements. |
| Our supervisory model is not sufficiently effective, risk-based or proportionate (cause), creating a failure to drive audit quality improvements or build firm(s) capability and market resilience (event), resulting in a lack of confidence in audit and a less sustainable and healthy audit market (effect). | FASS project. E2E project. Implement changes to our supervision of smaller audit firms to create a more proportionate inspections approach. Use our Scalebox initiative to work with smaller audit firms to help share best practice and develop their capacity and capability. |
| As a result of poor or inconsistent internal management and leadership or structures and systems (cause), the FRC fails to adapt to change (event) and deliver on its strategic objectives (effect). | Further develop our people strategy. |
| Due to cyber-attacks or an insufficiently mature approach to data and information management (cause), we fail to maintain our data or exploit opportunities for better regulatory outcomes (event). This results in loss of sensitive data, breach of law/regulation, fines and reduced regulatory effectiveness (effect). | Exploit modern data and information management practices. We will undertake a project to further reduce our reliance on external database providers and introduce greater automation of our data gathering exercises. |
5. Operational performance measures
In our 2025-28 strategy, we have described the high-level public interest stakeholder outcomes to which we believe our work actively contributes. We have also, for the first time, described the Market Health Indicators (MHIs) we believe are most relevant to understanding whether those outcomes are being achieved.
We must, of course, also measure our operational performance so that our stakeholders can understand the level of output in key areas of our remit. We have reported on these operational performance measures for several years and will continue to do so. In some cases, we have adapted, removed or included measures, where appropriate. For 2025-26, we have removed the measure relating to constructive engagement timeframes. This is because we do not believe the measure, as described, creates the right incentives to focus on the proper embedding of agreed improvements over early closure. As part of our E2E project we will review this and identify appropriate measure(s), which we will then report against.
We also note the government's recent action plan announcement which stated that they will strengthen the model of accountability with formal performance reviews undertaken by sponsoring departments and we will work with DBT on what this looks like for the FRC in terms of these operating performance measures and our MHIs.
The table below shows our full-year target for each measure and the performance in the previous full year. Performance for the 2024-25 financial year will be published in our annual report and accounts in July 2025.
Timely investigation and enforcement action is an important factor in discharging our regulatory obligations fairly and in a proportionate manner. As reported last year and in our Annual Enforcement Review, since April 2023 we have reported against a 2-year Key Performance Indicator (KPI) for 50% of cases and a 3-year KPI for 80% of cases. This provides a more sophisticated and accurate indicator of performance given the size and complexity of the Enforcement case portfolio. In 2023-24, we exceeded the KPI under both measures, achieving the 2-year KPI in 53% of applicable cases and the 3-year KPI in 88% of applicable cases.
As mentioned in our strategy, we expect to measure our success against the four strategic objectives through a combination of these operational performance measures and by tracking, over time, a range of selected MHIs.
| Category | Measure | Target 2025-26 | Target 2024-25 | 2023-24 (FY) |
|---|---|---|---|---|
| Supervision and monitoring | Number of AQR reports completed | 140-150 | 140-150 | 137 |
| Number of CRR reports opened | 240-260 | 240-260 | 243 | |
| Standard PIE auditor registration applications processed within 25 days | 100% | 100% | 100% | |
| Enforcement | Enforcement case investigations concluded, settled or closed within three-year target2 | 80% | 80% | 88% |
| Enforcement case investigations concluded, settled or closed within two-year target | 50% | 50% | 53% | |
| Financial and operational performance | Operating costs against budget (excl UKEB and case costs) | £61.4m | £60.9m | £59.6m |
| Recruitment against budget | 480 | 506 | 477 | |
| FRC complaints responded to within service level agreement timeframe | 100% | 100% | 100% |
6. UK Endorsement Board
The UK Endorsement Board (UKEB) was set up by the government in 2021 as an independent body, to influence, endorse and adopt new or amended international accounting standards issued by the International Accounting Standards Board (IASB), and to lead the UK's participation in, and contribution to, the development of a single set of international accounting standards. The UKEB is accountable to the Secretary of State for its technical decision-making and subject to FRC oversight in respect of its governance and due process. The FRC's Chief Executive acts as Accounting Officer for the UKEB. Further information can be found on the UKEB website.
The UKEB has set its budget at a level designed to ensure that it has adequate resource to enable it to fulfil its statutory objectives, which are approved by the Secretary of State, and deliver on its regulatory strategy. The UKEB's 2025-26 Regulatory Strategy is available to view on its website. In setting its budget, the UKEB consults with the FRC and follows the FRC's budgeting processes.
During 2024-25, the UKEB budgeted for a headcount of 30 (FTE: 30), which was flat against the prior-year headcount. In 2025-26, consistent with the overall budget approach taken by the FRC the UKEB will again keep its headcount flat. The UKEB considers that the budget is sufficient to undertake its statutory responsibilities. The full cost of the UKEB's funding is collected on their behalf through the FRC's funding arrangements. The influencing, endorsement and adoption of international accounting standards on behalf of the UK is not an FRC function, therefore UKEB costs are shown separately in Annexe 1, below.
Annexe 1 – Expenditure and funding 2025-26
Expenditure
We have set an overall budget of £72.3m for 2025-26 (2024-25: £71.5m). As noted in Section 3 this is £1.7m below the budget on which we consulted, as a result of the Government's decision to transfer our responsibilities as local audit system leader back to MHCLG and of efficiency savings.
Our budget comprises:
- Regulatory activities for which we set an annual budget, and which are funded through levies on market participants.
- Enforcement case costs, which reflect both the number and size of cases we are currently taking forward and our estimate of the costs of cases we might take on in-year. We recover case costs from the audit and accountancy professional bodies under the terms of our enforcement schemes.
- Activities carried out on behalf of, and funded by, the government or other public agencies.
- The cost of the UKEB, whose regulatory strategy is agreed by DBT, and which is funded by market participants through our preparers levy.
The budget for those functions funded by market participants in 2025-26 (including the UKEB) includes:
- The impact of inflation during 2024-25.
- The impact of the FRC's 2024 pay settlement. This was within the limit set by the government for the public sector (5% increase).
- The rise in employer NICs (1.2% increase).
Our investment in an enterprise resource planning system to enhance our long-term operational efficiency will be met through a contribution from our existing general reserves.
The following tables set out our proposed budget by our core regulatory activities, by division and by expenditure type.
Table 1: Expenditure by activity – summary
| 2024-25 Forecast £m | 2024-25 Budget £m | 2025-26 Budget £m | Budget to budget change £m | |
|---|---|---|---|---|
| Audit and assurance | 42.3 | 45.0 | 44.7 | -0.3 |
| Corporate reporting | 10.8 | 10.7 | 12.3 | 1.6 |
| Corporate governance and investor stewardship | 2.8 | 2.8 | 3.2 | 0.4 |
| Actuarial regulation | 3.7 | 3.7 | 3.9 | 0.2 |
| Other functions | 3.4 | 3.7 | 2.3 | -1.4 |
| UK Endorsement Board | 5.3 | 5.6 | 5.9 | 0.3 |
| Total | 68.3 | 71.5 | 72.3 | 0.8 |
The FRC has three divisions covering its regulatory activities and the corporate services and SGSE3 divisions, combined here. The budget for each division is as follows:
Table 2: Expenditure by division
| 2024-25 Forecast £m | 2024-25 Budget £m | 2025-26 Budget £m | Budget to budget change £m | |
|---|---|---|---|---|
| Supervision | 24.2 | 25.4 | 24.5 | -0.9 |
| Regulatory Standards | 10.1 | 11.3 | 10.0 | -1.3 |
| Enforcement | 4.1 | 3.9 | 4.0 | 0.1 |
| Corporate services and SGSE division | 20.7 | 20.3 | 22.9 | 2.6 |
| Sub total | 59.1 | 60.9 | 61.4 | 0.5 |
| Audit and accountancy case costs | 3.9 | 5.0 | 5.0 | - |
| Total FRC | 63.0 | 65.9 | 66.4 | 0.5 |
| UK Endorsement Board | 5.3 | 5.6 | 5.9 | 0.3 |
| Total | 68.3 | 71.5 | 72.3 | 0.8 |
Corporate services costs include IT, finance, HR and facilities costs. The SGSE division includes legal and analytical support for the Supervision, Regulatory Standards and Enforcement divisions. These support costs are assigned against our regulatory activities on a proportionate basis.
The budgets we have set for each of the FRC's regulatory activities are as follows:
Table 3: Expenditure by activity
| Expenditure by activity | 2024-25 Forecast £m | 2024-25 Budget £m | 2025-26 Budget £m | Budget to budget change £m |
|---|---|---|---|---|
| Supervision | ||||
| Audit Quality Review | 11.9 | 11.9 | 11.8 | -0.1 |
| Corporate Reporting Review | 7.6 | 7.6 | 8.5 | 0.9 |
| Audit Firm Supervision | 4.2 | 4.2 | 4.7 | 0.5 |
| Audit Market Supervision | 3.8 | 4.0 | 3.9 | -0.1 |
| Shadow Local Audit systems leadership | 1.2 | 1.7 | 0.0 | -1.7 |
| Professional oversight | ||||
| Audit and accountancy professional oversight | 7.4 | 7.4 | 8.3 | 0.9 |
| Third country auditor regulation | 0.7 | 0.8 | 0.8 | - |
| Enforcement core costs | 6.8 | 6.3 | 7.2 | 0.9 |
| Regulatory Standards | ||||
| Corporate governance and investor stewardship | 2.8 | 2.8 | 3.2 | 0.4 |
| Accounting and reporting standards | 3.2 | 3.1 | 3.9 | 0.8 |
| Audit and assurance standards | 2.5 | 3.7 | 2.9 | -0.8 |
| Digital reporting and taxonomies | 3.0 | 3.4 | 2.0 | -1.4 |
| FRC Taxonomies | 0.3 | 0.3 | 0.3 | - |
| Actuarial | ||||
| Technical actuarial standards | 3.5 | 3.5 | 3.7 | 0.2 |
| Actuarial professional oversight | 0.2 | 0.2 | 0.2 | - |
| Total core costs | 59.1 | 60.9 | 61.4 | 0.5 |
| Audit and accountancy case costs | 3.9 | 5.0 | 5.0 | - |
| Actuarial investigation costs | 0.0 | 0.0 | 0.0 | - |
| Total FRC costs | 63.0 | 65.9 | 66.4 | 0.5 |
| UK Endorsement Board | 5.3 | 5.6 | 5.9 | 0.3 |
| Total | 68.3 | 71.5 | 72.3 | 0.8 |
Table 4: Expenditure type
| Expenditure type | 2024-25 Forecast £m | 2024-25 Budget £m | 2025-26 Budget £m | Budget to budget change £m |
|---|---|---|---|---|
| Staff costs | 50.4 | 50.9 | 52.5 | 1.6 |
| NED and committee member fees | 0.9 | 1.0 | 1.0 | - |
| Facility costs | 4.7 | 4.1 | 3.8 | -0.3 |
| IT & website | 2.4 | 3.4 | 4.1 | 0.7 |
| Travel | 0.5 | 0.5 | 0.5 | - |
| Conferences | 0.3 | 0.3 | 0.3 | - |
| Recruitment | 0.5 | 0.5 | 0.2 | -0.3 |
| Training | 0.4 | 0.5 | 0.5 | - |
| Legal/professional/audit | 1.9 | 2.4 | 1.4 | -1.0 |
| Research | 0.2 | 0.5 | 0.4 | -0.1 |
| All other | 1.9 | 2.1 | 2.3 | 0.2 |
| FRC taxonomies | 0.3 | 0.3 | 0.3 | - |
| Total | 64.4 | 66.5 | 67.3 | 0.8 |
| Actuarial investigation costs | 0.0 | 0.0 | 0.0 | - |
| Audit and accountancy case costs | 3.9 | 5.0 | 5.0 | - |
| Total | 68.3 | 71.5 | 72.3 | 0.8 |
This table includes UK Endorsement Board costs.
Audit and accountancy enforcement case costs are shown net of the costs recovered under the terms of the enforcement schemes.
Funding requirement 2025-26
The FRC sets an annual funding requirement (AFR) as the basis for setting its annual levies. The AFR is set on the basis of (a) the annual budget for those costs subject to budgetary limits and (b) an estimate of enforcement case costs for cases being taken forward or taken on net of costs recovered. We have set an overall funding requirement of £72.3m for 2025-26.
To enable stakeholders to assess our expenditure against the funding we have raised, we compare our expenditure each year against the budget and funding requirement set at the beginning of the year, rather than the forecast outcome.
We have allocated the funding requirement as follows:
| Funding sources | 2024-25 Forecast £m | 2024-25 Budget £m | 2025-26 Budget £m | Budget to budget change £m |
|---|---|---|---|---|
| Audit and Accountancy funding groups | ||||
| RSB contribution to AQR | 10.7 | 10.7 | 10.7 | - |
| RSB contribution to AMS | 3.7 | 3.9 | 3.8 | -0.1 |
| RSB contribution to AFS | 4.1 | 4.0 | 4.6 | 0.6 |
| NAO & Crown Dependencies | 0.8 | 0.8 | 0.8 | - |
| CCAB contribution | 13.9 | 14.3 | 14.9 | 0.6 |
| CIMA | 0.8 | 0.8 | 0.8 | - |
| Audit and accountancy case costs | 3.9 | 5.0 | 5.0 | - |
| Sub total | 37.9 | 39.5 | 40.6 | 1.1 |
| Companies (accounts preparers) | ||||
| For the FRC | 19.5 | 18.8 | 20.7 | 1.9 |
| UK Endorsement Board | 5.3 | 5.6 | 5.9 | 0.3 |
| Government contribution | 0.6 | 0.7 | - | -0.7 |
| Sub total | 25.4 | 25.1 | 26.6 | 1.5 |
| Actuarial funding groups | ||||
| Insurance companies | 1.9 | 1.8 | 1.9 | 0.1 |
| Pension schemes | 1.5 | 1.7 | 1.8 | 0.1 |
| Actuarial profession | 0.2 | 0.2 | 0.2 | - |
| Sub total | 3.6 | 3.7 | 3.9 | 0.2 |
| FRC Taxonomies, TCA registration fees | 0.5 | 0.5 | 0.5 | - |
| Contribution from FRC reserves | 1.0 | 0.7 | - | -0.3 |
| MHCLG | 1.2 | 1.7 | - | -1.7 |
| Total | 68.6 | 71.5 | 72.3 | 0.8 |
FRC levies 2025-26
Audit and accountancy professional bodies
The audit profession's contribution to the cost of the FRC's audit quality review, audit firm supervision and audit market supervision activities is paid by the Recognised Supervisory Bodies.
The audit and accountancy professional bodies' contributions to the cost of professional oversight, standard-setting and a proportion (50%) of the core costs of our enforcement activities, are paid by the Consultative Committee of Accountancy Bodies (CCAB) and CIMA. The CCAB member bodies are ACCA, CAI, CIPFA, ICAEW and ICAS. CIMA contributes to the FRC's funding requirement under the terms of a separate agreement with the FRC.
Our role as shadow systems leader for local audit was funded by the MHCLG. Our work to monitor the quality of local audit will continue to be funded through the contributions from the audit and accountancy professional bodies.
Accounts preparers
Accounts preparers contribute through our preparers levy to the cost of our work on corporate reporting standards, corporate reporting review, corporate governance and investor stewardship, and a proportion (50%) of the core costs of enforcing auditing and accounting standards. Accounts preparers include listed and large private entities, UK AIM companies, and public sector organisations.
At the request of DBT, the FRC will continue to collect the cost of the UKEB (2025-26: £5.9m) through the preparers levy. This amount is included in the FRC's budget and annual funding requirement.
As requested by the government, we will continue to raise the UK's annual contribution to the IFRS Foundation (2025-26: £0.9m) through the preparers levy. This amount is not included in the FRC's budget or annual funding requirement.
Reflecting the costs of core regulatory functions, in particular our corporate reporting review programme, we will increase the amount we request through the preparers levy in 2025-26 by 9% compared with the amount we budgeted to raise in 2024-25.
For listed entities, the levies are calculated based on their market capitalisation at the end of September 2024 and the levy population identified by the FCA. For other entities, the levies are calculated based on the latest available data on their turnover. Listed preparers are asked to pay the levy based on the full rates; other entities are charged a proportion of the full rates. The following tables are based on our expectation that rates will need to increase by 4% to raise the amount we are requesting. In May 2025 we will confirm the levy rates we will apply based on the latest data provided by the FCA.
| Organisation size per £m of market cap* | 2025-26 Preparers levy rate |
|---|---|
| Minimum fee for all companies | £2,160 |
| Additional fees based on the following levy bands | |
| 100m - 250m | £21.18 |
| 250m - 1,000m | £16.16 |
| 1,000m - 5,000m | £15.63 |
| 5,000m - 25,000m | £0.2544 |
| > 25,000m | £0.0480 |
The following table gives examples of the amounts that will be charged to different types of entity based on the above tables:
| Organisation | 2025-26 levy |
|---|---|
| UK AIM company with £100m market cap (50% discount) | £1,080 |
| Private company with £750m turnover (50% discount) | £6,709 |
| Premium listed company: £10bn market cap (full rates) | £81,249 |
Actuarial levies
By agreement with the government, we fund our work on actuarial regulation through levies on pension schemes and insurers. These levies are collected on a non-statutory basis.
The actuarial profession contributes to the cost of actuarial professional oversight.
Pension levy 2025-26
The FRC pension levy applies to all defined benefit and defined contribution schemes with 5,000 members or more. We will raise £1.8m through the pension levy in 2025-26. We will confirm the levy rate to be applied after receiving data on scheme membership provided by the Pensions Regulator.
Insurance levy 2025-26
The insurance levy is allocated to insurance companies as a proportion of the FCA and Prudential Regulation Authority (PRA) regulatory fees and requested on the same invoice as the PRA fees. We will raise £1.9m from the insurance levy in 2025-26 and we will apply the levy rate necessary to secure this as a proportion of the Prudential Regulation Authority fees.
Reserve powers
Our funding arrangements are based on non-statutory arrangements put in place at the request of the government. Should these prove unworkable, the Secretary of State is able to make regulations to introduce levies on a statutory basis for those functions designated in The Companies (Audit, Investigations and Community Enterprise) Act 2004.
Third country audit regulation
The UK makes equivalence and adequacy decisions in relation to third country audit (TCA) regimes. Equivalence is granted when another country's audit regime is deemed to have a comparable level of regulation. Adequacy is granted when another country's audit competent authority is considered to have adequate data protection policies and procedures governing the sharing of information.
DBT has asked the FRC to make recommendations on equivalence and adequacy for selected countries. To do this, the FRC undertakes assessments. The decisions on equivalence impact how TCA firms are required to register as Third Country Audit Entities (TCAEs) in the UK and the amount of effort required by the FRC to maintain its public register of TCAEs. We have set a budget and funding requirement of £0.8m for this work in 2025-26.
Further information about our current funding is available on our website.
Contact Information
Financial Reporting Council
London office: 13th Floor, 1 Harbour Exchange Square, London, E14 9GE
Birmingham office: 5th Floor, 3 Arena Central, Bridge Street, Birmingham, B1 2AX
+44 (0)20 7492 2300 www.frc.org.uk
Follow us on LinkedIn
Footnotes
-
Strategy, Governance and Stakeholder Engagement, previously CEO division. Headcount changes between this division and Regulatory Standards are as a result of internal restructuring during 2024-25. ↩
-
Please see text in above table for an explanation of our chosen enforcement metrics ↩
-
Previously titled CEO division, now renamed as Strategy, Governance & Stakeholder Engagement to better reflect its activities. ↩