The UK Financial Reporting Council (FRC) has stated that achieving a more balanced and diverse public interest entity (PIE) audit market in the country will take “considerable time,” although the market share of non-Big Four firms is gradually increasing.
In its latest Audit Market and Competition Developments Update, the FRC noted a growth in challenger firms’ share of FTSE 350 audits, rising from 11% in 2022 to 13% in 2023.
While total PIE audit fees in the UK grew by 27% to £1.4bn in 2023, the Big Four—Deloitte, EY, KPMG, and PwC—earned 98% of FTSE 350 audit fees and 90% of fees across the broader PIE market.
Despite this dominance, the share of non-Big Four firms rose from 4% in 2019 to 13% by 2023, with BDO notably conducting more audits in the main listed and AIM markets than any other UK firm since 2020.
The FRC also observed a slight increase in companies switching from one Big Four firm to another, with a small number of firms transitioning to non-Big Four auditors.
The report, marking five years since the Competition and Markets Authority’s audit market study, highlighted growing diversity in the audit market for ‘other listed equity’ entities, while other PIE segments remained stable.
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By GlobalDataThe FRC expressed concerns about firms’ capacity to deliver high-quality audits, particularly as audit fees rise.
It acknowledged a widening gap in audit quality between the largest and smaller firms and emphasised the need for smaller firms to grow their capacity.
The council noted that significant changes will take time, especially at the top end.
FRC CEO Richard Moriarty said: While the Big Four continue to dominate the market for the audits of the largest UK businesses, in the past 12 months other audit firms have successfully grown their businesses and they are now taking on more complex audits.
“This report underscores our commitment to ensuring the whole market works as effectively as it can.”
The latest report comes after FRC issued a draft three-year strategy for 2025-28, aimed at supporting economic growth in the UK.
