The head of the UK accounting regulator is a contender to become chair of the High Speed 2 rail project, raising the prospect of further upheaval at the audit watchdog, which has been left in limbo by ministers’ decision to drop proposed reforms from the legislative agenda.

Sir Jon Thompson has been chief executive of the Financial Reporting Council since 2019, overseeing reforms during a period in which the watchdog roughly doubled in size to more than 400 people.

The FRC was branded a “ramshackle house” in a government-commissioned review in 2018 after auditors failed to raise red flags before corporate scandals at retailer BHS and outsourcer Carillion.

Thompson’s possible move to HS2 is a sign of what accounting executives say is his frustration at repeated delays to long-promised legislation to transform the FRC into the Audit, Reporting and Governance Authority, a new watchdog with greater powers to regulate auditors and directors of the UK’s biggest companies.

Thompson, who previously led HMRC and was permanent secretary at the Ministry of Defence, is seen as a capable and politically astute civil servant.

But the absence of statutory powers at the FRC has seen him forced to resort to negotiating with accounting firms in order to push through some regulatory changes, including a decision to make the Big Four — Deloitte, EY, KPMG and PwC — partially separate their audit and advisory operations and to reduce conflicts of interest.

“I think he’s very frustrated,” said one accounting executive. “He gave up running HMRC with 65,000 people reporting to him and a budget of over £3.5bn to move to the FRC, which then had a couple of hundred people and a budget of about £35-40mn. He did it on a promise [that there would be audit reform legislation].”

Thompson’s exit would create further upheaval at the FRC. During his tenure as chief executive in charge of day-to-day running of the watchdog, it operated without a permanent chair for almost two years. Its board was depleted as ministers failed to replace exiting directors until a recent recruitment drive.

The search for a new chair for HS2, one of the most senior public service roles in the UK, was relaunched in March after an initial recruitment process was abandoned. The role leading Europe’s largest infrastructure project has been vacant since Allan Cook quit six months early in July 2021.

Thompson has been a non-executive director at HS2 since April 2021 but was handed an expanded role as deputy chair in March. He is chairing the project until a permanent appointment is made.

It is not certain that Thompson will be appointed as permanent chair, according to two people aware that he was in the frame for the role. “There are other very strong candidates,” said one government official. “It’s a genuinely open process.”

The window for applications closed in April with final interviews due to take place this month.

It is unlikely that Thompson could remain in his full-time role at the FRC if he were appointed to lead HS2. He has a six-month notice period at the regulator.

HS2, which will link London to Manchester via Birmingham — with a spur to the East Midlands — has been hit by delays and been scaled back by the government. It has also attracted protesters and opposition across the political spectrum. The first section to Birmingham is due for completion between 2029 and 2033 at an official cost of £44.6bn.

The Department for Transport did not comment. The FRC and Thompson said they would not comment on “speculation”.


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