City welcomes EU moves to axe quarterly reports

Finally, UK businesses find a Brussels proposal which is to their liking

The name Michel Barnier is not often associated with moves to cut burdensome red tape on the City.

On Thursday, the European Union's internal market and services commissioner was accused by Conservative MP Peter Bone of trying to impose a continental standard of bureaucracy on the Square Mile.

The Frenchman might even be pushing for the introduction of a "Robin Hood" tax, which would see a levy imposed on every financial transaction undertaken by major institutions, warned Bone.

Barnier is demanding "a single market for financial services" across the EU's 27 nations, as he believes this is the only way to co-ordinate a solution to the economic crisis that continues to batter Europe.

While this almost certainly means that Barnier is plotting to change London's financial culture to more closely resemble Frankfurt and Paris, there are certain parts of the commissioner's mission that even the City can support. A major change that has been proposed this autumn – but one that has largely gone unnoticed due to the havoc wreaked by the eurozone crisis – could soon mean that companies will no longer have to waste their time giving poor quality information to the market.

Barnier wants to alter the 2004 Transparency Directive, which forces EU companies to give quarterly management statements. Some companies produce detailed financial figures with these statements; more typically they are bland documents as a result of management not wanting to, or not being able to, produce any better information than at the full-year or interim results.

Paul Polman, the chief executive at Anglo-Dutch consumer goods giant Unilever, has even gone so far as to argue that such statements only promote the short-termism that dogs the financial markets.

When he took over the Dove soap and Hellmann's mayonnaise producer in 2009, Polman stopped providing quarterly profit updates and earnings guidance to prevent investors destabilising the stock by making immediate, speculative responses, such as shorting the shares. For example, in Unilever's third-quarter trading statement earlier this month, the word "turnover" was mentioned 15 times and "profit" only once.

Fund managers crave information to help them make their stock picks, but they also want chief executives and their boards to focus on improving their companies' performances.

Luke Newman, who manages the Henderson Gartmore UK Absolute Return fund, says: "There is a fine line between balancing full disclosure to shareholders and allowing executives to run their businesses properly without having to cut through red tape."

The changes should particularly help smaller businesses, which do not necessarily have the resources or money to pay consultants to produce the documents. However, the Financial Services Authority remains keen on quarterly updates and there are arguments that small businesses in particular need to keep in contact with shareholders as even minor market changes can have a big impact on them.

The amendments to a directive that only came into force in the UK in 2007 are likely to go through the EU legislative process late next year. Member states will then have about two years to eradicate the requirement for quarterly reporting. UK regulators are likely to introduce the changes as late as they can, despite pressure from listed companies to act quickly.

"People will generally be happy with the abolition of quarterly reporting," says Linklaters partner Lucy Fergusson. "This is a burden that nobody has seen a huge amount of value come out of, and even investors say that what they want is better quality, not more information. This amendment ties in with the sense that investors look too short-term, forcing companies to also be short-termist."

There is a sense, then, that quarterly reporting fails to give investors extra insight into a company's prospects. Barnier may not be very popular in Britain right now, but this is one initiative that even Eurosceptic Tory backbench MPs can endorse.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee