Deloitte has warned the UK’s Competition and Markets Authority (CMA) to be careful if it overhauls the statutory audit market, expressing fears that the UK would be a less attractive market post-Brexit.

In its response to the CMA study, Deloitte said: “It is particularly important that at the time that the UK is leaving the EU any changes do not put the UK out of line with global norms or add significant costs and complexity for companies, their shareholders or auditors.

“Such changes could materially damage the UK’s competitive position and particularly London’s place as a leading capital market. This is one reason why the CMA should seriously consider whether a market investigation reference is appropriate.”

The need for change to the FTSE 350 audit market has had unanimous support from the UK’s leading firms. At the same time, the same firms have strongly expressed a need for caution before introducing any major overhaul. The main reason for this is the fear of creating a range of unintended consequences.

The main unintended consequence respondents to the CMA review have given is the worry that an overhauled audit market could actually reduce audit quality. Another is the possibility of additional costs for businesses if a joint audit model is introduced, without necessarily improving audit quality.

The notion of introducing market caps to the FTSE 350 market has gathered support, but most firms have expressed the need for these to be carefully introduced.

EY expressed the concern that a market share cap could reduce the amount of choice a company has in selecting its auditor if a Big Four firm already has its allocated share of FTSE 350 clients. While this has been suggested by some mid-tier firms as bias on the demand side, if a company cannot select its own auditor it could be seen as just another regulatory restriction.

If these unintended consequences manifest, it could be to the detriment of the FTSE 350 market and wider UK economy. As it stands, the UK is set to crash out of the EU without a deal on its future relationship with the world’s largest trading bloc. A range of UK headquartered business have already moved or have announced their intention to move following Brexit. With further regulatory pressures and additional costs, this could make the UK an even less appealing country to do business in.