Accountancy firm KPMG says it wants to build a European colossus.

The UK and German operations yesterday announced a proposal to merge to form a single entity, KPMG Europe, from what is currently a much looser affiliation.

It will remain a member firm of KPMG International, the global network of professional service firms providing audit, tax and advisory services.

With a projected financial turnover for the UK and Germany in excess of £2 billion in the current year, KPMG Europe claims it will be from the outset the largest fully integrated accountancy firm in Europe.

It will comprise more than 17,000 partners and staff working from 44 offices, and with its head office in Frankfurt.

The merger is the first stage in a plan to create a fully integrated European business.

The ambition is that other KPMG member firms in Europe will merge into the new entity, should they wish to join.

KPMG Europe will be chaired jointly by John Griffith-Jones, chairman of KPMG in the UK, and Prof.

Rolf Nonnenmacher, chairman of the managing board of KPMG Deutsche Treuhand-Gesellschaft.

In a combined statement, they said: "This is an innovative and ground-breaking move which is both necessary and important.

"This merger will create Europe's strongest and largest accountancy firm. KPMG has a distinct European heritage, and this will give us a true European voice on the global stage.

"We believe the merger will be good for all our clients, because we will be able to serve them even more effectively; good for our people, because it will increase opportunities open to them; good for the public interest and the capital markets, because of the combined strength and quality of our audit practice; and beneficial for our business, because it will enable us to take advantage of the enormous changes we are witnessing in economies and businesses globally."

The proposal has been approved unanimously by the respective boards - the deal is now subject to approval by partners.

That will take place during December. KPMG Europe will commence operations next year.

The merger is said to reflect the increasing international importance of the European capital markets - and the need to support the growing number of companies that choose to list on European exchanges.

It will be structured to meet the changing demands of clients who require a seamless audit, tax and advisory service on a pan-European basis.

Prof. Nonnenmacher said: "There can scarcely be a single European organisation, of any size, which is untouched by cross-border considerations.

"As is the case today, our delivery will remain local, but our capability will be truly international."

Mark Hopton, senior partner at KPMG in the Midlands, said: "Our UK and German firms have very complementary capabilities when it comes to serving major corporates.

"In fact, we already deal with many of our German firm's major clients - or their subsidiaries - right here in the region."