Mid-tier makes up ground on Big Four
Happy birthday Jeremy Newman. Or at least happy birthday Jeremy Newman's blog. In his latest post the BDO managing partner reflects on his first year in the blogosphere and recognises that his views have changed on the audit choice debate which has dominated his musings. 'One key difference,' he writes, 'is that I no longer think there is a "chasing pack" (as I referred to in my first posting) but rather maybe as few as two firms (obviously including BDO Stoy Hayward!) who are investing heavily in their people, infrastructure and international capabilities to be able to really maintain they are a credible alternative to the Big Four. That's borne out by recent research from Financial Director magazine. I've written a comment piece in next week's Accountancy Age on the subject. Here's an early sight of it.
In the current climate talking about the audit market may appear somewhat prosaic. The credit crunch has kicked the audit choice debate very much into touch – for now at least. But with the Financial Reporting Council promising its recommendations on injecting more competition and choice into the market due any time now, there are signs that the market is already beginning to shift.
The latest audit fees survey from our sister title Financial Director shows only a comparatively modest increase in FTSE100 audit fees – from an average of £3.7m to £4m. (That's if it's not too much of a stretch to describe an inflation-busting 8% as modest –especially during a year that has seen no regulatory step-change). And it shows a market firmly stitched up by the Big Four.
Drop to the FTSE250, though, and it's a subtly different story.
In that market, audit fees are dropping (15%) as are audit-related fees (taken together the two are down 7% year or year).
BDO Stoy Hayward's Jeremy Newman has, of course, led the mid-tier campaign for competition and choice. And there's some evidence that his campaign is beginning to deliver modest gains.
Albeit from a low base, BDO has grown its audit fees by 21% and its combined audit and audit-related fees by 57%. That said it's down by one client to five, but demanding higher fees from existing clients used to be the preserve of the bigger firms.
Perhaps more significantly Grant Thornton, a much quieter protagonist in this debate, has gained its first two FTSE250 clients, creating a six-firm market. Deloitte and KPMG both gained a client each, with E&Y and PwC in retreat.
It would be an exaggeration to suggest that these figures represent a revolution. But they do indicate a willingness on the part of some of the biggest (second-tier) companies in the UK
That is some inspirational stuff. Never knew that opinions could be this varied. Thanks for all the enthusiasm to offer such helpful information here.
Posted by Lonny Innerst | January 17, 2010 2:24 PM