The Mid-Tier Squeeze: Why UK Accounting's Second Tier Is Eating the Big Four's Lunch

• Mid-tier partner pay hit a record £565,000 average in 2024 — nearly two-thirds of the Big Four average, up from 45% a decade ago

• PE capital is turbocharing mid-tier consolidation, with Cinven backing Grant Thornton at an implied ~£1.5bn valuation

• Regulatory ring-fencing of Big Four audit practices and a consulting slowdown have structurally redirected mandates downmarket — and the mid-tier is capturing the margin

  
  

What Happened

According to a Financial Times analysis published in late April 2025, profit per equity partner across the five largest comparable mid-tier UK accounting firms — BDO, Grant Thornton, Forvis Mazars, Moore and RSM — averaged £565,000 in 2024. That figure has risen 83% since 2015, against under 20% growth at the Big Four over the same period. Most strikingly, RSM's equity partners averaged £821,000 in the year to March 2025, edging above EY's £787,000 — the first time a UK mid-tier firm has crossed that threshold.

Context & Data

• BDO surpassed £1bn in UK fee income, while Grant Thornton reached £724m and RSM £543m in their most recent reported years, according to Accountancy Today's Top 30 rankings

• The Big Four are currently experiencing stagnant combined fee income growth of 5.7%, whereas many mid-tier and smaller firms are posting significantly stronger numbers — Grant Thornton reported a 7.2% increase in fee income alone, with PE-backed firms collectively achieving a 19.8% uplift, per the 2025 Top Firms survey

• Globally, PE and venture capital firms invested $6.3bn in the accountancy sector in 2024 — the largest sum in a decade, according to S&P Global Market Intelligence data

• Cinven's buyout of Grant Thornton UK — the largest PE investment in the UK accountancy sector to date — closed in April 2025, with the firm valued at up to £1.5bn. Grant Thornton's 250 partners received an average payout of £682,000, up 6% year-on-year, alongside a one-off £39m bonus distributed to wider staff

• The FRC's annual Key Facts and Trends report found that mid-sized firms were growing faster than the Big Four in 2024, with the Big Four leaning more heavily on audit revenue as consulting demand remained sluggish

  
  

My Take

From a PE lens, this is a textbook market structure shift worth paying close attention to. The Big Four's operational separation requirements, completed by the FRC deadline in October 2024, have functionally constrained their ability to cross-sell advisory and audit mandates to the same client — a key historical margin driver. That regulatory overhang, combined with a sharp post-pandemic correction in consulting revenues, has pushed complex mid-market mandates towards firms with fewer conflict-of-interest constraints. The mid-tier is structurally better positioned to capture this flow: lower cost bases, leaner pyramids, and — increasingly — PE-funded technology investment are improving both their capacity and their pitch. The virtuous circle is real: higher-margin wins fund talent retention, which enables more complex work, which funds higher partner pay.

The valuation dynamics are compelling too. Grant Thornton at roughly 2x revenue is not cheap for a professional services business where human capital is almost entirely the asset, but Cinven is paying for a platform with embedded client relationships, brand equity, and the operational leverage that comes from nationalising cost structures across a fragmented mid-market. RSM's cross-border merger creating a $5bn-revenue multinational and BDO's structural overhaul point in the same direction: scale arbitrage is the play. The interesting question for an investor is whether these firms can hold onto the entrepreneurial culture that's driven the outperformance once institutional capital, performance metrics, and KPI dashboards land on the desks of people who chose partnership precisely to avoid all that.

Risks & Watch-List

• Talent retention after PE entry. The "entrepreneurial mindset" cited by departing Big Four partners may not survive a Cinven ownership model optimised for exit multiples. If mid-tier partners begin to feel the same "bloated" overhead pressure they left behind, the competitive differentiation narrows quickly

• Regulatory creep. The FRC (likely to be reformed into ARGA) is monitoring ownership structure changes closely. Any tightening of independence requirements around PE-backed audit firms could structurally impair the very compliance and advisory work driving margin expansion

• Boutique disruption from below. US advisory boutiques — Alvarez & Marsal UK partners averaged over £1.4mn in 2024 per Companies House filings — operate "eat what you kill" models that are highly effective at poaching senior rainmakers. The mid-tier now faces a two-front war: defending against the Big Four above and retaining partners tempted by boutique economics below

• Macro and deal cycle sensitivity. Much of the mid-tier's recent outperformance reflects a disproportionate Big Four exposure to the transactions and consulting downturn. If M&A volumes recover materially in 2025-26, the Big Four will recapture some of that margin gap — potentially quickly given their distribution and balance sheet strength