The man with the Big Four in his sights

THERE is much that separates BDO, Britain’s number six accountancy firm, from the so-called Big Four. One of the lesser known differences is that Simon Michaels, the managing partner of BDO, didn’t go to university, instead taking a training place at the accountant immediately after his A-Levels in 1987.

It certainly hasn’t held him back. In February, he was elected for a second term as managing partner of BDO, which has global revenues of $5bn (£3bn) and around 50,000 staff.

When we meet in the group’s Baker Street offices, he is clearly passionate about the school leavers that the firm recruits these days. “Over the next five years it wouldn’t surprise me if we take on as many school leavers as we do graduates,” he tells me.

“The kids are making different choices themselves. They don’t want to go to university and load themselves up with debt. They can join us from A Level and in five years get the same accounting qualification but with much more experience and a salary of some sorts.”

Although BDO is offering more opportunities to school leavers, Michaels says there is a “risk of a lost generation of kids, because there are not enough jobs out there to keep them happy”. The economic outlook is, he says, “grim”, while the UK is facing five years of low growth. The “school leavers being produced are absolutely fantastic”, he says, but competition is “fierce” and “there are just not enough jobs to go around”.

According to Michaels, one area where competition just isn’t fierce enough is the audit sector, which is dominated by the Big Four – PwC, Ernst & Young, KPMG and Deloitte. He is one of the leading voices calling for new rules that would “force” the market to open up.

“There are a lot of people talking about how the profession doesn’t need to change, not us, but a number of our competitors. That to me strikes as self-serving. Self-serving to say everything’s fine, we can’t do anything better. I don’t buy that.”

He offers a variety of remedies that he thinks would improve things. Accountancy firms who audit a firm could be banned from selling it other lucrative services, such as advisory work, meaning BDO and others would get more business. He also wants to ban banks from insisting that the firms they lend to use a Big Four auditor. Joint audits, where a Big Four firm would be joined on the ticket by a smaller player, would also open up the market, he says. And he is clear about one thing: “There won’t be a lot of change until it is forced”.

Many will say this is special pleading, especially as BDO would profit considerably if these measures were introduced, but Michaels’ views are shared by regulators in high places. The Competition Commission is probing the audit market following a referral by the Office of Fair Trading while the EU is also pursuing its own shake-up.

Michaels insists that BDO is not too small to take on the big boys. “It is a perception thing. BDO is an international network that turns over $5bn. We have over 50,000 people in 135 countries. Yet sometimes we’re told we’re not big enough. There is no other industry in the world where with that sort of size you would be told you’re not big enough.”

But when I ask whether BDO would be able to audit Barclays if it won the contract tomorrow, he admits the answer is “no”. “There are about 35 companies in the FTSE 100, the largest financial services companies, the largest pharma, oil companies, that we wouldn’t have the capability to audit,” he says, adding that he is more interested in focusing on the firm’s core market – mid-market firms and FTSE 250 companies.

“We could build the capability to audit the very largest businesses over time, but there’s no point recruiting hundreds of people to sit on the bench when there’s no likelihood in the short-term that the market will open up.”

Still, if regulators introduce the reforms championed by Michaels, BDO could soon have more work – and more accountants – on its hands.

AGE: 42

WORK HISTORY: Was first elected as managing partner in April 2008. Joined BDO in 1987 as a trainee. Headed up the firm’s Business Restructuring division from 2004 until his election as managing partner

EDUCATION: Went to school in Edgware

FAMILY: Married with two boys and two girls, aged nine, eleven, thirteen and fifteen.
“They’re good at maths but I wouldn’t go as far as recommending them to accountancy.”

LIVES: Hertfordshire

HOBBIES: Running marathons, most recently in Dubai. Has set himself a target of running one on every continent. “I’m really good round the first half of the marathon and then my legs start hurting, but I get round.”
Enjoys skiing, especially in Canada.