Binder Hamlyn considers merger approach from Arthur Andersen

Regional partners of Binder Hamlyn, the accountancy firm, meet today to discuss a merger approach from its rival Arthur Andersen, a move that would significantly increase Andersen's British audit base.

The two have been discussing a merger for some months, but a formal approach is believed to have been made by Jim Wadia, Andersen's British senior partner, two weeks ago.

Andersen is the world's largest accountancy firm but, because it expanded to Britain from the US just 35 years ago - relatively recently in accounting terms - it has not developed a strong base here. Instead, more than half its fee income is generated from consultancy, where its strong information technology practice rivals top names like PA.

Last year it earned pounds 407m in Britain, four times Binder Hamlyn's pounds 100m. Andersen's audit clients include WPP, Storehouse, Cadbury Schweppes, Argyll Group and News International while Binder Hamlyn lists United Newspapers, Thames Television, Norweb and Nurdin & Peacock. Its only FT-SE 100 client, however, is Southern Electric.

Binder has been the subject of constant speculation in recent years as it is one the few remaining medium-sized firms left in Britain. Others, such as Spicer and Oppenheim and McLintocks, have been swallowed by larger firms anxious to expand client lists.

Smaller firms are also being squeezed by the growing trend among large companies to opt for an auditor from the big six. That was underlined last month when J Sainsbury said it was switching its audit from Clark Whitehill, one of the second tier of firms, to Coopers & Lybrand, one of the big six.

The merger also comes against a background of fierce competition. Clients are looking for savings on their audit fees and are turning increasingly to the courts when they are dissatisfied with the service.