THE RECENTLY FLURRY of acquisitions has seen the emergence of the 'Middle Three' at the top end of the accountancy league table, according to Baker Tilly's managing partner Laurence Longe (pictured).
BDO's acquisition of PKF, Grant Thornton's double-digit increase in fee income, and the acquisition by Baker Tilly of RSM Tenon via a pre-pack administration, has seen the three firms move away from the next tier.
Just as the Big Four is far ahead of its closest rival, in terms of fee income, the same is becoming apparent for the next three, says Longe.
"Because of the market consolidation you have got the "Big Four, now we have the Middle Three", he said.
The smallest of the Big Four sees EY with £1.6bn in fee income in the latest Accountancy Age Top 50 table. Its closest rival Grant Thornton has a fee income of £460m, highlighting the huge difference between the firms.
After the acquisitions are totted up it is likely that the gap between the next three, Grant Thornton, BDO and Baker Tilly and the eighth spot will widen drastically.
BDO and PKF's 2012 combined revenues would show a combined fee income of £384.8m, while Baker Tilly and RSM Tenon's 2012 figures added together will give them a combined fee income of £378m.
That leaves a huge gap to eighth-placed Smith & Williamson, which had a fee income of £185.7m in the latest rankings.
Although Longe will not reveal how much he believes his firm's fee income will be in the next year, he estimates that BDO's will sit around the £380m mark and Baker Tilly won't be far behind it.
Firms need the scale if they want to compete to provide client services, explains Longe.
"Size is a necessary condition. You have to be a certain scale of operations," he says.
He explains that the Big Four previously went through this period of change, given that their growth was through a series of mergers some 25 years ago.
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