The FT has reported this morning that:
The UK accountancy firm Grant Thornton has decided to stop bidding for audit contracts from Britain’s largest listed companies after concluding it is too difficult to compete with the “big four” firms that dominate the market.
The decision will deal a major blow to efforts by the four — Deloitte, EY, KPMG and PwC — to convince politicians and regulators not to intervene in the market.
It will also increase pressure on UK authorities to tackle their dominance: the big four’s share of FTSE 350 auditing has increased from 95 to 98 per cent over the past five years.
Read the full report and it is clear that Grant Thornton can present an entirely rational reason for doing this.
But also read the report and what is clear is that this is politicking by Grant Thornton. And I am happy to applaud them for that.
The fact is that Grant Thornton is pointing out in the clearest possible way that they can that there is a closed shop in the market for the audits of large companies: apparently only the Big 4 can do. But as Grant Thornton also point out they can win 40% of the public sector audit market. There is then an oligopoly, but as they are making clear, it is not based on competence. Rather, as is always the case in political economy, it is based on power. And in this case the power is being used in not just an anti-competitive fashion, but in an anti-social one too.
The time when the audit market has to be reformed has arrived. Maybe there will be no market at all. Maybe Grant Thronton will not win from their gambit. But, candidly and like the rest of us, they can also hardly lose from it at present. The Big 4 are failing us. Their dominance has to end.