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Demand for services within the UK auditing market reached a value of £13.5 billion in 2012, showing a compound annual growth rate (CAGR) of 3% over the past six years, broadly in line with nominal GDP growth.
Regardless of economic conditions, the statutory requirement for the submission of audited financial accounts generates regular demand for services provided under the UK auditing market and results in a stable revenue base for the industry.
The primary customers of accounting and auditing services were monetary intermediaries and insurance and pension funds, contributing around 22% of all domestic demand.
The reason for this is a more sophisticated accounting and auditing procedure of financial services firms compared with other businesses, which translates to higher fees from the aforementioned companies.
The UK auditing industry is characterised by a medium level of market share concentration, with the largest four players accounting for 52% of industry revenue. Concentration is much higher for the auditing of large companies in the United Kingdom.
The Big Four accounting firms - PricewaterhouseCoopers, Deloitte, KPMG, and Ernst & Young - audit almost 99% of companies in the FTSE 100 following a constant increase in the client base from this group.
This level of dominance has come under attack from politicians and regulators across Europe. The audit reform currently debated by the European Commission is intended to combat this.
Some of the genuinely local players in UK auditing and accounting market are Grant Thornton UK and BDO, but their sales in 2012 were significantly lower than their nearest competitors from the Big Four.
The Big Four companies will most likely remain the dominating companies in the market, unless a large-scale scandal brings down one of them, as was the case with Arthur Andersen in 2002.
In 2013 the turnover of the UK auditing industry is expected to grow at rate of more than 6%. Strong expected growth is supported by stricter auditing standards going forward. Also, auditing standards are converging to single global accounting standards, and convergence will need a lot of effort from highly qualified professionals to adapt new provisions into accounting policy.
For more information on the UK auditing market, see the latest research: UK Auditing Market
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