It should be no surprise that both the European Union and local governments are eagerly looking forward to introducing regulations to increase competition in the accountancy market. A new survey of Accountancy Age in the United Kingdom once again clearly demonstrates the need for this. For the third consecutive year, the market share of the 100 largest accountants has increased. More shocking is the market domination of the four largest professional services: last year the revenue of the four firms represented 70% to 75% of the total accountancy market.
PwC, Deloitte, KPMG and Ernst & Young
In the UK rankings, PwC leads the pack followed by Deloitte, KPMG and Ernst & Young. The four firms have a combined revenue of £7.73 billion, where the fifty largest agencies jointly ran £10.30 billion in revenue. The combined revenue of the numbers 51 to one hundred on the list, represented with £323 million less than 0.05 % of the total market.
The domination of the Big Four is not only the case in the United Kingdom, similar market share patterns are visible across Europe. That is why the European Commission is considering several measures that are conducive to competition in the accountancy market. An overview of the most radical measures proposed:
- Companies with a balance sheet of more than €1 billion need to hire two auditors; one of which may not belong to the so-called Big Four.
- Companies are allowed to hire the same auditor up to nine years, after that they are obliged to change.
- The big accountancy firms need to collaborate more with smaller competitors.
- The big accountancy and consulting firms are deemed to separate their non-monitoring activities from their monitoring activities. In other words, they must repel their consulting branches.
The plan of the Commission will be further developed in the coming months.