PWC poised to win Lloyds auditing deal

It is understood that the firm is recruiting heavily in preparation for the Lloyds-HBOS merger going through, leaving rival firm KPMG – which audits Bank of Scotland – with a big hole in its fee income.

The loss of Bank of Scotland would be a major blow for KPMG. Last year it brought in 6.8m in fees from auditing its accounts and carrying out related services such as advising on corporate transactions and compliance.

But PWC, which received an audit fee of 12m from Lloyds in 2007, is said to be planning ahead by hiring staff.

Neither KPMG nor PWC would comment on the speculation, though KPMG confirmed that it is carrying out a review of its tax and advisory division in Edinburgh which will lead to job cuts. A spokeswoman said there will be limited local redundancies because of the economic climate.

The merger between HBOS and Lloyds is expected to be approved by HBOS shareholders on Friday, assuming that a legal challenge fails. In the latest twist in the saga, a cross-party group of MSPs has accused the Business and Enterprise Secretary Lord Mandelson of trying to "bully" the Merger Action Group into dropping its attempts to have his decision to waive competition rules declared unlawful.

Lawyers acting for Lord Mandelson have threatened to sue MAG's six core members individually for legal costs unless they halt the action which is due to be heard by the Competition Appeal Tribunal tomorrow.

The ultimatum was delivered to MAG's lawyers on Friday afternoon, demanding they withdraw their appeal by 5pm the same day.

However, the MSPs – independent Margo MacDonald, Scottish Liberal Democrat leader Tavish Scott and the SNP's Alex Neil – urged MAG to stand firm.

Neil on Friday tabled a motion in the Scottish Parliament calling on Lord Mandelson to refer the proposed merger to the Competition Commission as the Office of Fair Trading had recommended at the outset.

But sources close to the merger camp insist the deal will not be disrupted and is due to complete in January when Lloyds Banking Group will launch.

The audit account will be among the most eagerly sought after. A PWC spokeswoman would only say: "Despite the difficult economic conditions, we are continuing to invest and recruit in growth areas and take long-term investment decisions."

She said the firm is approaching graduate recruitment with a mood of "cautious optimism". It is not reducing the number of graduates it will hire this year, and across the UK it expects to take on approximately 1,000.

But PWC was last year criticised by the Liberal Democrats for making fees from advising Northern Rock on securitisation transactions and the raising of wholesale funding during 2006. These risky activities contributed to the bank's decline, which forced it to go cap in hand to the Bank of England.