Only billionaires need apply to join the Big Four

Only billionaires need apply to join the Big Four

So Ernst & Young will break through the £1bn turnover barrier this year for the first time. It’s an important threshold to cross.

Not, perhaps, as noteworthy as breaking through the sound barrier, but for
the accountancy sector it is significant.

On the one side it heralds 20% annualised growth for the firm, a figure that
confirms the Big Four are seeing a return to substantial double digit growth.
Last year saw generous growth too, but E&Y’s projected 2006 numbers mean
that it is now a mini trend and not a one-off.

The good times have come for a number of reasons. The continued pressure from
new regulation has carried over into a second year, but E&Y’s outgoing
chairman, Nick Land, also points to the fact that transactions ­ mergers and
acquisitions ­ are now providing a hefty chunk of the firm’s income.

That’s good news. Businesses are being bought and sold and that makes the
City happy because it signals confidence in the economy.

For the accountancy sector, however, E&Y’s income levels will mean that
all Big Four firms earn above £1bn in the UK alone. The billion-pound threshold
becomes a part of what it is to be a Big Four firm.

That tells us a couple of things. Firstly, just how important the UK is to
the big firms. After the US it is their next biggest market place.

Secondly it serves to re-emphasise the gulf that exists between accountancy’s
big quartet, and the rest of the sector. Grant Thornton, the UK’s fifth largest
firm earns £254m a year, that’s just £750m short of the sum needed to make the
Big Four a Big Five again.

It is difficult to imagine now, with a £1bn entry fee for the joining the
club, how another firm could rival accountancy’s big guns.

But that said, being a Big Four firm is not just about the revenues. It’s
about global reach. It’s about having a contact in every major city across the
world where business is done. And it’s about having the confidence of the
multi-nationals that you can handle the work.

The £1bn is the surface badge of what lies beneath. Despite what regulators
and businessmen would like, it remains difficult to see how anyone would compete
with that.

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