The Big Four accounting firms are facing pressure to break up their U.K. businesses after a scathing government report labeled them a “cozy club” with conflicts of interest embedded in their audit functions.

The Financial Times reported that all four firms are planning for a potential breakup amid mounting concerns over the audit market in the wake of the collapse of government contractor Carillion in January.

The Big Four were “guilty of failing to tackle the crisis” at Carillion, “prioritizing their own profits ahead of good governance at the companies they are supposed to be putting under the microscope,” said Rachel Reeves, a member of parliament who chairs the Business, Energy and Industrial Strategy Committee.

The BEIS and Work and Pensions committees this week released a report urging the U.K.’s competition watchdog to consider breaking up the four, saying they operated as an “oligopoly” and a “cozy club incapable of providing the degree of independent challenge needed.”

“KMPG, PwC, Deloitte, and EY pocket millions of pounds for their lucrative audit work — even when they fail to warn about corporate disasters like Carillion,” the report said. “It is a parasitical relationship which sees the auditors prosper, regardless of what happens to the companies, employees, and investors who rely on their scrutiny.”

The four firms sign off on the accounts of 97% of the U.K.’s 350 largest listed companies. KPMG had audited Carillion’s accounts for 19 years.

According to the FT, there are two possible breakup scenarios: The Big Four could either be split into two smaller multidisciplinary firms or their consulting work could be spun off to create audit-only businesses.

Bill Michael, chairman of KPMG’s U.K. business, said his firm had been thinking about break-up scenarios “for some time” as the current business model of the Big Four is “unsustainable”.

“We are an oligopoly — that is undeniable,” he told the FT. “I can’t believe the industry will be the same [in the future]. We have to reduce the level of conflicts and  . . .  demonstrate why they are manageable and why the public and all stakeholders should trust us.”

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