Damian Wild

Ever since Andersen collapsed the question most frequently asked by regulators examining choice at the top end of the audit market has been: ‘ Are four firms enough?’

But with corporate collapse and market concentration intensifying, that question no longer seems relevant. Instead, perhaps, we should be asking the question: ‘Do we really need as many as four firms?’

Such are the extraordinary developments in financial services markets on an almost hourly basis that any summary risks being overtaken by events. But, at the time of writing at least, two banks have fallen (Lehman Brothers to administration, Merrill Lynch to Bank of America); two others are entertaining a shotgun marriage (HBOS and Lloyds TSB); and an insurer (AIG) has lost its market status.

It’s by no means confined to the financial services industry.

BA chief executive Willie Walsh has predicted that as many as 30 airlines will go to the wall between now and Christmas ­ on top of the 30 that have already collapsed around the world in recent months.

XL, that most media-friendly of implosions given the way in which it lent itself to images of stranded holidaymakers, is seen as the tip of the iceberg when it comes to the wider travel industry.

Meanwhile the high street is in a torrid state, possibly only rivalled in the gloom stakes by commercial property developers and house builders.

The upshot for the next 12 months is that auditors will trade clients as businesses merge and lose them as others collapse. And given that much of the shrinkage will be at the upper end of the FTSE and Dow Jones indices, we could well see the number of audit clients held by each of the Big Four shrink.

I wouldn’t expect many commentators, as a result, to be asking whether four firms are too few any time soon.

Will this affect jobs? Certainly. Will it cost jobs? In that sense it will be harder to establish cause and effect.

In the US, Deloitte is making ‘adjustments to its workforce levels’ while E &Y is freezing hiring in the UK. Those are, of course, programmes that will be stepped up there and elsewhere if the global slowdown grinds any closer to a halt ­ or even a retreat.

Damian Wild is editor in chief of Accountancy Age and blogs at accountancymatters.accountancyage.com