EY in UK sets aside record £188m for fines and legal claims

EY has ring-fenced almost £200 million (€231 million) to pay off regulatory fines and legal claims in the UK, the highest level disclosed by the Big Four accounting firm as it battles multiple assaults on the quality of its audit work.

The firm added £188 million to the pot of cash it uses for settling legal claims and regulatory fines in the year ending June 2025, putting its total provisions at £184 million, up from £44 million the previous year, according to its annual report filed last week at Companies House.

The figure is almost seven times the average amount that EY has set aside for claims annually since the firm began reporting the figures in 2002, according to FT analysis.

It exceeds the £179 million set aside by rival Big Four firm KPMG in 2022, ahead of its settlement with the liquidators of Carillion, who had brought a £1.3 billion claim over KPMG’s alleged negligence in its audits of the collapsed outsourcer.

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The sharp rise in provisions comes as EY faces a series of legal claims and regulatory investigations linked to the quality of its audit work. Litigation risk across the sector has risen and increasingly weighs on profits among the Big Four as they battle slowing revenues.

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In February, EY settled a closely watched £2 billion High Court lawsuit, brought by the administrators of collapsed hospital operator NMC Health, for an undisclosed sum and “without admission of liability”. The claim alleged that EY had missed a series of “red flags” in its audit, accusing the firm of negligence.

EY’s filings did not disclose whether the £188 million provision related to the settlement of the NMC case. Professional negligence cases against auditors are frequently settled for a fraction of the headline sum claimed.

A former Big Four executive said that payouts for large claims are often staggered across multiple years, making it difficult to determine the full size of settlements from one year’s provisions.

In its annual report, EY called the NMC claim “highly speculative” and said the £2 billion figure was “not considered to be within a range of possible outcomes”. It added that disclosing whether provisions had been made could “seriously prejudice the position of the firm”, as the trial was still in progress at the time the report was compiled.

The Financial Reporting Council’s probe of EY over its audits of NMC continues. The firm has denied any negligence and has claimed it was a “principal target” of the fraud.

EY is facing four other regulatory investigations and last year battled the largest number of probes by the watchdog of Big Four firms.

In December, the accounting regulator opened a probe into EY’s audit of Shell, one of the most lucrative mandates in the FTSE 100. Shell dismissed EY as its auditor weeks later. Four partners left the firm over the matter.

Other investigations relate to EY’s work for the Post Office and collapsed retailer Made.com.

The Companies House filing said that EY had paid out £48 million against claims in the year ending June 2025.

EY was fined about £5 million in the financial year ending June 2025, including for “serious breaches” in some work on failed travel group Thomas Cook’s accounts. In April, the Big Four firm was fined £325,000 for auditing Stirling Water Seafield Finance, which has publicly listed debt, for more than the 10-year time limit.

Provisions across the Big Four vary significantly. Deloitte reported £57 million set aside in May 2025, KPMG £31 million in September 2024 and PwC £19 million in June 2025. PwC had previously set aside £181 million in its 2024 financial year and paid out £162 million.

Like its peers, EY is protected by professional indemnity insurance, which limits the impact of claims once the claim exceeds a deductible. The firm operates an in-house insurer that passes part of the risk to external providers. Its “trade and other receivables” – which include insurance recoveries – rose by £116 million in the year to 2025.