Oxera, the think tank that compiled the contentious report arguing that there was too much concentration in the UK audit market, pushed the boundaries of the profession a little further last week with a hard-hitting review of the European Union’s ownership rules.

Commissioned by the EU, the Oxera study found that current audit firm ownership rules, limiting ownership to auditors only, were hindering the capacity of the profession to invest and grow.

The study said allowing firms to seek outside investment would go a long way to increasing choice and competition in the audit market.

According to Oxera, the structure of an employee-owned entity limits access to capital in the first place. Members require additional returns due to their exposure to risk unique to an audit firm. The cost of capital is also higher since firms seek funds on a national basis, unlike multi-nationals which seek funding globally.

Relaxation of the EU ownership rules could allow firms the option, over time, of exploring private equity, stock market listings or funding from high-net worth individuals to access funds.

But will firms, assuming that the EU takes on Oxera’s findings, actually take the jump and open their businesses to outside investment?

Senior figures in the profession, such as Sir Mike Rake, the former head of KPMG and currently chairman of BT, have already swatted this idea aside.

‘The answer here in my personal view is that it is not an external capital issue. And there are restrictions and other issues to do with independence,’ Sir Mike said.
‘I can’t quite see why that would be attractive to anyone.’