The creation of the UK's fifth largest accountancy firm was confirmed yesterday with the merger of Grant Thornton and rival RSM Robson Rhodes.

The deal sets the enlarged business up to challenge the current "big four" accountancy giants of PricewaterhouseCoopers, KPMG, Deloitte & Touche and Ernst & Young.

The new company will operate as Grant Thornton when the deal is completed in July and boast fee incomes around #375 million a year.

Grant Thornton chief executive Michael Cleary said that the deal added to the firm's already strong platform as an adviser and auditor to AIM-listed business and more than doubled its presence among FTSE companies.

He is looking to boost Grant Thornton's revenues to more than #500 million over the next three years following the deal.

Mr Cleary said: "We have considerably added to our firepower to consistently challenge the Big Four in key areas. We are now gearing ourselves to stimulate competition and offer stakeholders greater choice."

Grant Thornton was previously the sixth largest UK accountancy firm, but has now overtaken rival BDO Stoy Hayward. Robson Rhodes, with 73 partners and 900 staff, was ranked 12th. The combined group will have more than 4,400 staff and 300 partners in 33 offices around the UK. There will be more than 300 people based in Birmingham.

Mr Cleary, who has held on-off talks with Robson Rhodes managing partner David Maxwell over a potential merger in recent years, said the company was "a perfect fit" and strengthened Grant Thornton's presence in financial services, construction, health educational and public sector work.

He said: "It is a boost to our efforts to break down those market perceptions which would not usually associate Grant Thornton with the larger public audit market."

Mr Maxwell, who is to join the board of Grant Thornton, added that the combined business would also have stronger teams in specialist areas such as project finance, forensic accounting and corporate restructuring.