The BEIS Committee is pressing the government to break up the Big Four. I agree. Their chokehold on corporate accounting is bad for business, investors and innovation as a whole.
The House of Commons Business, Energy and Industrial Strategy (BEIS) Committee isn’t messing around. Following a long investigation into company audits – triggered by the high-profile accountancy scandals which engulfed BHS, Carillion and Patisserie Valerie – they are asking the government to break up the Big Four accountancy firms. I agree with them.
The Big Four – KPMG, PWC, Deloitte and EY – represent 97% of FTSE 350 companies. This is a monumental slice of the pie. But their power and control is not some expression of industrial efficiency. Far from it. Last year the Financial Reporting Council – the UK’s accounting regulator – found that a startling 27% of audits of FTSE 350 companies it reviewed weren’t up to scratch.
The problem isn’t an ‘expectations gap’, as some accountancies have claimed. It’s that these massive accountancies have lost their professional scepticism, becoming too trusting of their client’s finances. The consequences are perilous: poor bookkeeping, unreliable audits.
This uneven arrangement has turned toxic. The industry’s ability to inspire and conduct trust is being questioned. Investor confidence is being rattled. Clearly, the accountancy market is failing. So the government has a duty to step in.
Too Big to Succeed
Oligopolies are bad for business. Gargantuan consultancies simply can’t give small and medium-sized customers the attention they deserve. And their volume-first strategies leave little room for reasonably-priced expertise.
Given their variety and complexity, I believe businesses are better served by a range of smaller, specialist agencies, each of which value their clients’ custom and understand the finer points of their finances.
This is certainly true in the R&D Tax Credits space. R&D Tax Credits claims, if done properly, are lengthy, complex and highly technical. For the consultancy, that is. A great deal of specialist knowledge is required, particularly when writing a company’s technical narrative – the detailed and contextual explanation of its research and development efforts. Without this expertise, companies risk leaving tens of thousands of pounds on the table, or filing an inaccurate claim, which can lead to complications with HMRC.
Thankfully the market for R&D Tax Credits advice doesn’t mirror accountancy as a whole. Eligible companies have a range of mid-sized R&D Tax Credits consultancies to choose from. Yet many businesses stick with the traditional players.
I understand why. Tax isn’t something most executives and entrepreneurs want to think about. They want to simplify the regulatory stuff so they can get on with running their business. Hence the product-bundling offers of larger firms are appealing for most businesses.
But bigger is by no means better. The BEIS Committee’s research and recommendations prove as much. Though we in the R&D Tax Credits space have known for a long time. Take it from an expert: Companies that want to maximise their tax credits claim are much better off with a specialist – a partner with expertise, and passion for their clients – than they are with a stately, expensive but ultimately faceless accountant.
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