In the rules currently under proposal:
Upsides:
Ships may combine firepower.
Ships may take one command check for the entire squadron to go on the same SO, using highest character's leadership value, else highest capital ship, else escorts own.
Ships may still go on special orders individually using their own leadership.
Ships cannot be targeted individually - this to prevent a formation being picked apart by strategic shots.
Downsides:
Formation must be maintained. No ship in the squadron may take any orders whatsoever, not even BFI, if the ship is not currently in formation, and any Lock-On orders are cancelled if the ships lose formation during the movement phase. (significant new penalties)
If any ship goes on SO unilaterally, the squadron may not take SO as a whole, negating all the squadron's leadership/Command Check benefits to other ships.
Hits spill over. Necessary mechanic for firing at escorts, and arguable for any formation of ships moving coherently together.
Larger formations are more unwieldy than individual units.
I'd say there are still significant drawbacks to squadroning your vessels. But these can be modified slightly.