Two EY restructuring executives have resigned to join an independent rival, in a move which highlights the pressure on "big four" accountants' business models as regulators plot to end their dominance of the market.

Sky News has learnt that Lee Watson and Jessica Clayton, who were long-standing EY transaction advisory services (TAS) partners, quit this week to join AlixPartners, an advisory firm owned by a group of financial investors.

The move is significant because it comes as the Financial Reporting Council (FRC) and competition regulators are pressing for greater separation between the big four's audit and consulting practices.

Watchdogs are proposing to ban any non-audit work being undertaken by firms on behalf of audit clients, and to enforce "operational separation" between the two sides of their businesses.

The issue has been thrown into sharp focus at EY - which has largely steered clear of the multimillion-pound penalties for audit transgressions that have beset its rivals - by the firm's decisions to audit Debenhams and Thomas Cook, according to industry sources.


Both audit clients were taken on less than two years before the companies entered major financial restructurings, which EY was then prohibited from acting on.

Debenhams and Thomas Cook both subsequently entered insolvency proceedings, and although the department store chain continues to trade, EY is no longer auditing it.

Mr Watson and Ms Clayton - neither of whom could be reached for comment on Friday - are said to have decided to leave EY amid growing frustration in the wider profession about the restrictions on non-audit partners' ability to pitch for business in a widening range of circumstances.

The partners are, however, understood to have otherwise been satisfied at EY and impressed by the firm's leadership.

Their resignations are said to have been announced internally earlier this week.

Their move means that two experienced professionals in the UK transaction advisory market are moving to an independent firm which does not have to juggle potential conflicts with audit clients.

Mr Watson was seconded to the board of Carillion shortly before it collapsed in 2018, and has played a key role in a number of prominent corporate restructurings.

Ms Clayton was heavily involved in the financial restructuring of Interserve, the outsourcing giant, which was taken over by its lenders last year.

AlixPartners, which played a key role in liquidating Thomas Cook late last year, is backed by a group of long-term investors, including two Canadian pension funds.

While notable, the EY partners' move to AlixPartners is not unprecedented.

In 2016, the head of KPMG's restructuring practice and a team of colleagues quit to join Alvarez & Marsal.

Other independent firms making significant strides in the UK insolvency market include FTI Consulting, which acted as administrator to Debenhams last year.

AlixPartners and EY both declined to comment.