Many business journalists could tell you of a story they have written several times, changing not much more than dates and personalities. Mine concerns periodic calls to rein in the Big Four (once the Big Six, and then the Big Five).
It is 20 years since ‘hammer of the bean counters’ Austin Mitchell inveighed against moves to enable what were then most commonly described as ‘multidisciplinary practices’ combining accountancy and law. The Labour MP for Great Grimsby warned that this would exacerbate conflicts of interest and ethics, and fatally undermine the independence of the statutory audit.
The Big Five need not have worried. New Labour wasn’t listening. In any case, this particular incarnation of the MDP sputtered when Arthur Andersen burned in 2002.
Yet, here we are again. Influential MPs are calling for the Big Four – KPMG, Deloitte, PwC and EY – to be broken up following a spate of corporate scandals. Meanwhile, the Competition and Markets Authority is preparing to pronounce on what should be done about their stranglehold on the FTSE audit market.
The threat posed by an ‘operational’ separation of audit (the most likely CMA recommendation) to the four’s wider businesses may well be overplayed. But the stakes are high. Deloitte’s recent capture of magic circle heavyweight Michael Castle to head its legal services arm certainly made the City sit up. His intent is plain. Buoyed by their enviable heft in the technology sector, Deloitte and its peers reckon they can transform legal services.
In fact, they are already on their way. Recent research by Thomson Reuters found that the quartet, offering services such as litigation support, legal research and document review, are moving up the value chain more quickly than anticipated. A quarter of large law firms said they had lost work to one of the four.
So far those competitors have appeared sanguine. Perhaps they shouldn’t be. As another former magic circle heavyweight, Tony Williams, told a Gazette roundtable this month: ‘I think anybody who says accountants are not a threat is smoking something quite expensive.’