Grant Thornton opts out of FTSE 350 audit bids

Grant Thornton has opted out of bidding for audit work for FTSE 350 companies in a move that could add to pressure for the recently proposed shake-up of an accountancy market dominated by four giant firms.

Britain’s fifth-biggest accountancy firm will not bid for new FTSE 350 audit contracts because of the financial cost and the effect on staff morale when they are beaten by one of Deloitte, PwC, EY and KPMG, the Financial Times reported.

Each tender costs about £300,000 but Grant Thornton routinely comes “a glorious second place” in the bidding, chief executive Sacha Romanovitch told the FT.

“Structures in the market make it impossible for us to continue to succeed in it,” she said. “If this space is dominated by four players and there does not seem to be market appetite to change, let’s focus on areas where we can [succeed]. You have to have that strategic clarity.”

Under rules that took effect in 2016, FTSE 350 companies must put their audit work out to tender every 10 years and change their auditor every 20 years. The change was designed to create more competition in a market where auditors remained unchanged for decades – PwC audited Barclays for 120 years until 2014. But the effect was to increase competition between the Big Four.

The Financial Reporting Council has responded to political unrest about the Big Four’s dominance by discussing a potential investigation with the Competition and Markets Authority that could lead to a break up of the firms. Carillion’s bankruptcy helped prompt the review after KPMG signed off its accounts months before it collapsed.

FRC chief executive Stephen Haddrill called for an investigation into whether KPMG, Deloitte, PwC and EY should have to spin off their UK audit arms into separate businesses, with the aim of increasing competition and eliminating conflicts of interest arising from the dominance of the quartet.

Grant Thornton will concentrate on auditing public sector organisations and smaller listed companies as well as consulting work for FTSE 350 companies. It will keep auditing the five FTSE 350 companies it covers now, including JD Wetherspoon, Interserve and Sports Direct.