By Marcus Leach

Business Minister Edward Davey has welcomed an agreement on new, simpler accounting rules which will benefit up to 1.5 million small British companies, during a regular meeting of Business Ministers from across the EU in Brussels.

Small companies, or micro-entities, form the backbone of the British economy but have limited resources to comply with the same accounting requirements as larger companies. The agreement reached today (Tuesday) will exempt these companies from some obligations, potentially saving between £150-300 million per year in reduced administrative costs.

“I greatly welcome the progress made today in Europe to simplify the accounting rules for our smallest companies," Mr Davey said.

"This is a significant step in reducing red tape and a clear signal that we will take action to stop our smallest companies being held back by excessive regulation.

“I believe this shows what can be achieved by a positive and constructive engagement with the European Union - the first ever exemption for micro-entities from an existing EU directive. We now need to build on this breakthrough and I hope that further improvements can be agreed before the proposal becomes law.”

Member States will now discuss the measures with Members of the European Parliament, who must also give their approval before the new rules can enter into force.