EY has set aside a record £188mn to cover regulatory fines and legal claims in the UK, underscoring intensifying pressure on the Big Four firm as it faces multiple investigations into the quality of its audit work. The provision, disclosed in its latest annual filing, represents a dramatic increase from £44mn the previous year and brings the total reserves to £184mn, marking the highest level the firm has ever reported.
The sharp rise reflects growing litigation risk across the accounting sector, where firms are increasingly grappling with high-profile claims and regulatory scrutiny while dealing with slower revenue growth. The latest figure is nearly seven times EY’s average annual provisions since it began reporting such data in 2002, and even surpasses the £179mn set aside by rival KPMG in 2022 ahead of its settlement related to the collapse of Carillion.
The surge in provisions comes as EY navigates a series of legal battles and investigations tied to its audit work. Among the most prominent cases is a £2bn lawsuit brought by administrators of NMC Health, which was settled earlier this year for an undisclosed amount without any admission of liability. The claim accused EY of failing to detect warning signs of fraud during its audits. While it remains unclear whether the newly disclosed provisions relate to that settlement, industry insiders note that large payouts are often spread over several years, obscuring their full financial impact.
EY has pushed back against the allegations, describing the NMC claim as “highly speculative” and asserting that it was itself a “principal target” of the fraud. Meanwhile, the UK regulator, the Financial Reporting Council, continues its investigation into EY’s handling of the case.
The firm’s challenges extend beyond NMC. It is currently facing four additional regulatory probes, including scrutiny of its audit of Shell, one of the most valuable mandates in the FTSE 100. The energy giant dismissed EY as its auditor shortly after the probe was launched, leading to the departure of four partners. Other ongoing investigations involve EY’s work for the Post Office and collapsed online retailer Made.com.
Financially, EY reported paying out £48mn in claims during the year ending June 2025 and incurring about £5mn in fines. These included penalties for serious breaches linked to its audit of Thomas Cook, as well as a separate fine for exceeding regulatory time limits in auditing a debt-listed entity.
Across the Big Four, provisions vary widely. Deloitte reported £57mn set aside in 2025, while PwC disclosed £19mn for the same period, though it had previously set aside a much higher £181mn in 2024. The disparities highlight differing exposure to legal risks and the uneven impact of regulatory scrutiny within the sector.
Despite the mounting liabilities, EY and its peers are partially shielded by professional indemnity insurance, which helps absorb losses beyond certain thresholds. The firm’s receivables, including expected insurance recoveries, rose significantly during the year, indicating that some of the financial burden may ultimately be shared with insurers.
The escalating provisions signal a broader reckoning for the global audit industry, where reputational risks, regulatory pressure, and costly litigation are increasingly shaping financial outcomes and strategic priorities.
