Big Four maintains dominance of FTSE 100 and 250 audits

Despite building pressure on watchdogs and UK lawmakers to break up the Big Four, the top accounting and advisory providers remain dominant in the UK auditing market after the first quarter of 2018. BDO is presently the only firm outside the Big Four to hold a client in the FTSE 100, while Grant Thornton has announced it will cease to bid for new auditing work among the FTSE 350, a process it believes costs more than it brings in.

In recent months, the largest members of the accounting and advisory world, headed by the Big Four – Deloitte, EY, KPMG and PwC – have come under mounting pressure to separate their consulting and auditing wings in the UK. Over the past five years, the Big Four’s share of FTSE 350 auditing increased from 95% to 98% despite a series of EU and UK reforms aimed at tackling a lack of competition since the 2008 financial crisis. Fears of both monopolisation and conflicting interests have both grown through 2018, meanwhile, as all of the Big Four were implicated in the collapse of Carillion.

Since then, a parliamentary report, and Stephen Haddrill, Chief Executive of the Financial Reporting Council – which oversees the British auditing market – have both hinted that the future holds a break up for the top names of the industry to avoid further such debacles. In spite of this, however, the Big Four’s grip on the top business audits in the country has steadfastly remained – with PwC remaining top dog, even after losing three FTSE 100 clients in the first quarter of 2018. Cancelling that out, PwC gained four FTSE 250 clients over the same period, bringing its total to 73 companies, according to latest Adviser Rankings' guide – produced in association with professional services firm Crowe Clark Whitehill.

Elsewhere in the FTSE 250, KPMG lost ground to Deloitte, losing two clients to bring it level with its rival on 64 clients in the market. Completing the Big Four’s FTSE 250 presence, EY ranks fourth, with 40 FTSE 250 clients having also lost two in the previous quarter. In the FTSE 100, Deloitte retained all 23 of its clients while EY lost one and remains in fourth with 17 clients. While there is apparently some minimal change among businesses, with some moving away from the Big Four having been worried by what the future may hold, the market remains largely unmoved then, and the dominance of the Big Four stands firm.

BDO, the sixth largest accounting and advisory firm in the UK, was the only organisation not in the Big Four to audit among the FTSE 100 – retaining its only client in the top tier – but is clinging to its place at the top table, having lost a FTSE 250 client over the quarter. Elsewhere, Grant Thornton saw its position in the FTSE 250 improve by a single client, taking its total tally to six, in the same quarter that the firm announced its intent to withdraw from bidding in the FTSE 350 audit market altogether.

Grant Thornton revealed the plans earlier in 2018, citing the “competitive landscape” as a reason for the strategic decision. Tender processes for such contracts average out at a costly £300,000 per courtship, after which the firm routinely comes “a glorious second place”, according to Sacha Romanovitch, Grant Thornton’s Chief Executive.

The plans provoked further calls for state intervention to prevent the Big Four from monopolising the market – however Grant Thornton itself issued a statement recently decrying the divorcing of top auditing firms from their consulting wings, saying it “fundamentally does not believe that this is the solution to the existing systemic issues in the audit market.”