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
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
‘I can’t quite see why that would be attractive to anyone.’
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