Opinion: global shifts could end the Big Four’s dominance

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Major global events, particularly Joe Biden’s presidency and Brexit, could combine to benefit the UK’s smaller accounting firms in 2021 and beyond, says Chris Biggs, Partner, Theta Global Partners.

The first months of 2021 have brought us seismic changes– from the simpler vaccine roll-outs, Brexit and presidential handovers, to the more complex vaccine export rows and riots at the US Capitol. None of this has gone on without effects being felt around the world.

Joe Biden’s inauguration as US president is likely to have a major impact on finance, trade, climate change measures and many other sectors, including in accountancy.

In the accounting market, standards such as the IFRS, and whether businesses will continue to follow these, will have long-term implications for investors, auditors and business leaders alike. This could make the UK more attractive to foreign investors or put firms at risk of having to follow two sets of rules if they trade internationally.

After a parliamentary committee ordered the separation of auditing and consulting services in the Big Four firms, the FRC came under threat as the government tried to show its teeth in governing this area.

However, with Biden looking to have a closer relationship with Europe, it looks increasingly likely that to remain a globally facing country that acts as a bridge between Asia, Europe and North America, the UK government may need to deal with the Big Four (and this issue), and bring governance more in line with its European and American counterparts.

Biden has set out plans for increased spending in many sectors including green tech, and has mooted increased regulation for big tech and others. If, however, he extends this to the Big Four and follows UK business secretary Kwasi Kwarteng’s desire to reform their audit arms, 2021 could present a fantastic opportunity for smaller firms to capitalise.

Areas to watch

The majority of 2020 was a slow year for the UK’s deals market, with mergers and acquisitions depressed by the pandemic and its subsequent lockdown restrictions.

In accountancy, this trend may be reversing, and is welcome news for a sector that has been quiet over the last year. The end of the Big Four’s dominance could also open the door for smaller, more nimble firms to capitalise, and the increasing demand for consultancy around deals means that those looking for a more tailored service will in many cases look for small providers.

Shifting priorities

The past year has really allowed smaller firms to compete in a way that has been difficult in the past. There are no more advantages to a massive office in Canary Wharf when everyone is working from home. Those overheads now look like an unnecessary excess to clients weighing up their options.

As businesses look to avoid actual or perceived conflicts of interest, expect a big shift towards smaller firms. It is easy to get lost in a sea of big clients if your firm is not a key account, but when working with smaller accountancy practices your needs are prioritised, no matter how big you are. This has come into increased focus throughout the pandemic and will continue long beyond it.

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.

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