Andersen is to merge its UK operations with Deloitte & Touche after KPMG, which had been in global merger talks with Andersen, apparently walked away from the deal over concerns on Andersen's potential legal liability for the collapse of Enron.

While KPMG declined to comment on the collapse of talks with Andersen in the UK, a senior source close to the firm pointed to the class action lawsuit filed in the US this week against Andersen and various investment banks over the collapse of Enron. Andersen's UK business was named in the lawsuit as a defendant.