Table of Contents
Overview
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- Key issues covered in this Report
- COVID-19: Market context
- Economic and other assumptions
- Covered in this Report
Executive Summary
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- Impact of COVID-19 on accounting and financial management
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- Figure 1: Short, medium and long-term impact of COVID-19 on accounting and financial management, 16 February 2021
- The market
- UK accounting and financial management market declines by an estimated 9% in 2020
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- Figure 2: UK market for accounting & financial management, 2016-20
- Consultancy services represent strongest growth sector, but demand disrupted by COVID-19
- Audit and accounting services sector estimated to decline by 6% in 2020
- Tax services sector hit by stalled demand for M&A-driven and international tax work as a result of COVID-19
- Corporate finance & business recovery services sector declined by an estimated 12% in 2020
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- Figure 3: Segmentation of the UK market for accounting & financial management, by type of service, 2015 and 2019
- Corporate finance, business recovery and advisory services to drive market recovery and growth
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- Figure 4: Forecast UK market segmentation for accounting & financial management, by type of service, 2021-25
- Companies and brands
- ‘Big four’ account for 80% of top 20 firms’ UK fee income
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- Figure 5: Top 10 accounting firms in the UK, by fee income, 2020 (% of top 10 fee income)
- Trends in acquisitions, partnerships and alliances
Issues and Insights
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- Advisory services to play key role in post-COVID-19 recovery
- Forthcoming reforms to further shake up audit sector
The Market – Key Takeaways
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- Market value contracts by an estimated 9% in 2020 due to impact of COVID-19
- Market set to return to growth in 2021
- Resurgence in M&A market to boost demand for corporate finance services
- Restructuring and insolvency activity set to pick up
- Audit and accounting sector expected to return to moderate growth in 2021
- Consultancy services sector set for robust recovery
Market Size
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- UK market for accounting and financial management declines by an estimated 9% in 2020 due to impact of COVID-19
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- Figure 6: The UK market for accounting & financial management, 2016-20
- Figure 7: The UK market for accounting & financial management, 2016-20
- Accountants expand, diversify or specialise
Market Segmentation
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- Consultancy services command a rising share of UK accounting and financial management market
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- Figure 8: Segmentation of the UK market for accounting & financial management, by type of service, 2016-20
- Figure 9: Segmentation of the UK market for accounting & financial management, by type of service, 2020
- Audit & accounting
- Forthcoming reforms to further shake up audit sector
- ‘Big four’ remain preferred auditors for largest listed companies
- Challenger firm BDO becomes largest auditor of listed companies by number of clients
- Mid-tier firms grasp opportunities to compete for non-audit work for FTSE companies
- ‘Big four’ report stronger rise in audit fee income than rivals
- Audit fees at top end of market expected to increase further
- Investment in technology will help improve audit quality
- COVID-19 impact on audit sector
- Audit and accounting services sector estimated to decline by 6% in 2020
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- Figure 10: UK fee income from audit & accounting services, 2016-20
- Tax services
- Regulatory changes and tighter tax rules stimulate demand for tax advice and compliance services
- Implications of Making Tax Digital for accountants
- Tax services sector hit by stalled demand for M&A-driven and international tax work as a result of COVID-19
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- Figure 11: UK fee income from tax services, 2016-20
- Consultancy
- Brexit-related uncertainty and new UK-EU trading relationship fuels demand for advisory services
- ‘Big four’ benefit from strong rise in public spending on consultants
- COVID-19 exerts downward pressure on demand for advisory service but also offers opportunities
- Accountancy firms expand consultancy and advisory functions through strategic acquisitions
- Increased competition from legal services firms branching out into consultancy services
- Consultancy services represent strongest growth sector, but demand disrupted by COVID-19
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- Figure 12: UK fee income from consultancy services, 2016-20
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- Figure 13: UK fee income from consultancy services, 2016-20
- Corporate finance and business recovery
- Restructuring and insolvency activity set to pick up
- Corporate finance sector hit by reduced M&A activity in 2020
- Corporate finance & business recovery services sector declines by an estimated 12% in 2020
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- Figure 14: UK fee income from corporate finance & business recovery services, 2016-20
- Overseas trade in accountancy services
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- Figure 15: International trade in accountancy services, 2015-19
- Figure 16: Exports and imports of accountancy services, 2015-19
Market Forecast
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- Short, medium and long-term impact of COVID-19 on the accounting and financial sector
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- Figure 17: Short, medium and long-term impact of COVID-19 on accounting and financial management, 16 February 2021
- Market drivers and assumptions
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- Figure 18: Key economic drivers affecting Mintel’s market forecast, 2019-25 (prepared on 12 February 2021)
- Forecast methodology
- Corporate finance, business recovery and advisory services to drive market recovery and growth
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- Figure 19: Forecast UK market segmentation for accounting & financial management, by type of service, 2021-25
- Figure 20: Forecast UK market segmentation for accounting & financial management, by type of service, 2021-25
The Impact of the Economy
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- UK economy contracts by record 9.9% in 2020
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- Figure 21: Annual GDP growth rate, historic and forecast, 2015-25, (Annual % change)
Market Trends
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- Use of technology to improve efficiency and quality of audits
- Large firms shift emphasis to consulting services
- Digital transformation of business represents a key driver for the consulting services sector
- ‘Big four’ lead the global market for cybersecurity consulting services
- Firms expand their regional presence and adopt levelling-up agenda
- Large accounting firms gain market share in legal services market
- ‘Big four’ legal teams at forefront in investing in LawTech
- Cloud accounting software enables accountants to form closer relationships with clients
- ‘Big data’ and data analytics represent key growth areas for accountants
Regulatory and Legislative Environment
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- Industry regulation
- Audit market reforms opens up market to increased competition
- Further reforms on the way following the conclusion of reviews looking at different aspects of the audit sector
- CMA Market Study identifies serious competition concern in audit market
- Sir John Kingman’s review recommends abolishment of FRC, to be replaced by new regulatory body ARGA
- Sir Donald Brydon’s review calls for the establishment of a new corporate auditing profession
- BEIS Select Committee inquiry into ‘The future of audit’
- Crackdown on tax avoidance
- Making tax digital
- Temporary measures introduced to allow more time for statutory annual auditing and accounting processes amid COVID-19 crisis
Market Drivers
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- Number of active businesses in the UK
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- Figure 22: Number of private sector businesses in the UK, 2006-20
- Figure 23: Number of private sector businesses in the UK, 2006-20
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- Figure 24: Number of VAT and/or PAYE-registered enterprises in the UK, by broad industry group, 2015 and 2020, (Number and %)
- COVID-19 crisis reverses growth trend in self-employment
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- Figure 25: Self-employed workers in the UK, 2009-20 (000s and %)
- Government support measures suppress insolvency rates in 2020
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- Figure 26: Number of company insolvencies, receiverships and administrations in England & Wales, 2010-20
- Corporate credit conditions
- M&A activity set for resurgence, following a subdued 2020
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- Figure 27: Mergers and acquisitions involving UK companies, 2007-20
- Number of listed companies on a downward trend, but uptick in IPO activity expected in 2021
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- Figure 28: Number of main market and AIM-listed companies, 2010-20
- Figure 29: Number of main market and AIM-listed companies, 2012-20
Companies and Brands – Key Takeaways
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- ‘Big four’ report stronger rise in audit fee income than rivals
- But challenger firm BDO becomes largest auditor of listed UK firms by number of clients
- Acquisitions and partnerships revolve around technology space
- Some firms look to enhance their legal services offering through acquisitions
Industry Structure
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- Overview
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- Figure 30: Top 20 accounting firms in the UK, by fee income, 2020
- Number of audit firms gradually declining
- ‘Big four’ report stronger rise in audit fee income than rivals
- But challenger firm BDO becomes largest auditor of listed UK firms by number of clients
- Industry Structure
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- Figure 31: Analysis of the changes in the structure of the UK accounting, bookkeeping, auditing and tax consultancy industry, 2016-20
- Structure by employment
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- Figure 32: Analysis of the employment structure of the accounting, bookkeeping, auditing and tax consultancy industry, 2019 and 2020
- Structure by turnover
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- Figure 33: Analysis of the financial structure of the UK accounting, bookkeeping, auditing and tax consultancy industry, 2019 and 2020
- Figure 34: Analysis of the financial structure of the UK accounting, bookkeeping, auditing and tax consultancy industry, 2020
- Trends in acquisitions, partnerships and alliances
Competitive Strategies
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- BDO and Moore Stephens merge to create the largest UK accountant and business adviser focused on mid-sized businesses
- Deloitte enhances its legal offering with acquisition of Kemp Little
- Deloitte grows its capacity to support clients with their digital transformation programmes through Keytree acquisition
- EY expands SAP consulting capabilities with AgilityWorks acquisition
- EY develops COVID-19 Enterprise Resilience Framework
- KPMG to sell restructuring division
- PWC’s investment focus on technology and upskilling continues
Company Profiles
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- BDO LPP
- BDO and Moore Stephens merger creates the largest UK accountant and business adviser focused on mid-sized businesses
- BDO becomes largest auditor of listed UK firms by number of clients
- Company performance
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- Figure 35: Financial analysis of BDO, 2016-20
- Figure 36: Segmental turnover analysis of BDO, 2020, (£m and %)
- Deloitte LLP
- Deloitte last of the ‘big four’ to enter the legal services market
- Deloitte Legal enhances its legal offering with acquisition of Kemp Little
- Deloitte acquires technology consultancy Keytree
- Deloitte to expand its consulting team in the North
- Financial performance
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- Figure 37: Financial analysis of Deloitte, 2017-20
- Figure 38: Segmental turnover analysis of Deloitte, 2020, (£m and %)
- Ernst & Young LLP
- EY expands legal offering through Riverview Law acquisition
- EY expands SAP consulting capabilities with AgilityWorks acquisition
- EY develops COVID-19 Enterprise Resilience Framework
- Financial Performance
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- Figure 39: Segmental turnover analysis of EY, 2020 (£m and % of total)
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- Figure 40: Financial analysis of Ernst & Young, 2016-20
- Grant Thornton UK LLP
- Grant Thornton restructures to serve three strategic markets
- Grant Thornton no longer bids for FTSE 350 audit work
- Grant Thornton sells wealth advisory arm to focus on core markets
- Grant Thornton audit performance branded “unacceptable”
- Financial performance
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- Figure 41: Segmental turnover analysis of Grant Thornton, 2019
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- Figure 42: Financial analysis of Grant Thornton UK, 2015-19
- KPMG LLP
- Global KPMG network commits to major investment in technology, people and innovation over next five years
- KPMG to sell restructuring division
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- Figure 43: Segmental revenue analysis of KPMG, 2020
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- Figure 44: Financial analysis of KPMG, 2016-20
- PricewaterhouseCoopers LLP
- Investment focus on technology and upskilling continues
- Financial performance
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- Figure 45: Segmental turnover analysis of PwC, 2020, (£m and % of total)
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- Figure 46: Financial analysis of PwC, 2016-20
- RSM UK Holdings
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- Figure 47: Segmental turnover analysis of RSM UK Holdings, 2020
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- Figure 48: Financial analysis of RSM UK Holdings, 2016-20
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Methodology
Further Sources and Contacts
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- Trade associations
- Trade magazines
- Trade events
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