legal services; corporate finance, including business recovery; and management consultancy.
The growth in the accountancy market has slowed down appreciably as the recession begins to take its toll on UK businesses. The accountancy firms have not been immune to the problems suffered by their clients, namely rising costs, narrowing profitability and weakening markets. The growth in the market in 2008 was half that of 2007 and substantially below that of 2005 and 2006 when growth was in double figures. Tax and legal services has been the strongest sector of the market, while consultancy has been the weakest. Total audit revenues are growing but there is pressure on fee rates. Key Note estimates that the total accountancy market increased in value by 4.1%
in 2008. That estimate includes an estimate for the growth in the consultancy market, in which some of the largest accountancy firms are also operating.
The accountancy market is dominated by the `Big Four' global accountancy firms, as it has been since 2002. They audit almost all the top 100 public companies along with the majority of the top 350 companies. Beyond the
Big Four, there are many so-called mid-tier firms. Some of these are very sizeable and they can, at times, provide competition to the Big Four. In 2007, the Big Four firms appeared to be succeeding much better than the rest of the accountancy industry, but this no longer looks to be the case. The major accountancy firms are also experiencing a more difficult market as clients cut back on their spending, and as demand for the more sophisticated types of accountancy services falls.
The whole basis on which this profession is founded is being questioned and this will continue to be the case for the rest of 2009 and well into 2010. The collapse of some financial institutions that were scrupulously audited according to the rules of auditing has led to questions being raised over what value should be ascribed to a set of audited accounts; i.e. what should an audit be doing? Should the rules and criteria by which audits are created be changed? Is a set of accounts any guide as to how a business might perform in the future?
Several accountancy firms have faced legal action in the past and some are currently facing it. There is a worry that there might be more legal cases in the future. So legal liability is a big concern for this profession.
Key Note is forecasting a fall in the accountancy market in 2009 of 1.8% and modest growth of 4% in 2010. Thereafter, the market will grow at a faster pace. However, it may be 5 years before the market as a whole grows in double figures, i.e. 10% or more as it has done sometimes in the past.
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