With Lambert Fenchurch's roots stretching back to 1849 and Heath's to 1909, this week's mega merger resonates with historical connotations. But the most important fact of all is that Britain's directly-owned broker sector has shrunk once again and is now down to just two world-ranking names.

On the more positive side, the new group LFH – shame about the name – probably has a more viable future than its constituent parts. The same is not said of many other brokers further down the food chain.

The interesting call is how these other brokers will react to this week's news. At the top end of the UK market, the Big Five will continue to circle round each other, picking off smaller fry to add their empires. This gets them so far, but what they would dearly love is to pull off the big one and take over a proper rival.

Such a move is unlikely to happen for one very good reason: the Office of Fair Trading would see it as a step too far. There are already whispers that the Whitehall bureaucrats are showing renewed interest in the commercial influence wielded by the biggest brokers. It has come to their ears more than once that the biggest have been none too subtly threatening the major insurers into breaking off relations with the far smaller brokers.

The fact they deliver so much business to the insurers means the smaller brokers are being squeezed out of business.

As long as the consumer, or insurance buyer, is not being disadvantaged by this development, the OFT will take no action. But it is not always the case that the consumer benefits from the actions of the largest brokers. Sure, good deals can be delivered to the brokers' big customers.

But all too often this acting out of the laws of the commercial jungle means the smaller insurance buyer cannot find the deal that suits his precise needs. He is, in effect, disadvantaged.

This is a issue that will need careful watching, and it would be interesting to hear Biba's views on "broker squeeze".

Ironically, this development may actually assist the smaller brokers. As broker consolidation is not in the insurers' interests, insurers may be keen to nourish more agencies than has been commonly assumed will be the case.

For all the talk of agency culling, very little has actually occurred. Insurers now they make more profit, relatively, from taking this type of business than they do from the top brokers. And certainly those brokers who are looking to acquire other brokers are not finding the pickings as easy as pundits have predicted: more brokers than had been imagined are actually enjoying business life these days, and are keen to hang on in there.

Broker consolidation may take a little longer than many had predicted.