Table of Contents
Overview
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- What you need to know
- Covered in this Report
Executive Summary
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- The market
- UK accounting and financial management market demonstrates consistent annual growth
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- Figure 1: UK market for accounting & financial management, 2014-18
- Consultancy services drive overall market growth
- Lack of competition in FTSE350 audit market remains major concern
- Increased demand for tax advice and compliance services
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- Figure 2: Segmentation of the UK market for accounting & financial management, by type of service, 2014 and 2018
- UK market for accounting and financial management is expected to demonstrate moderate annual growth over next five years
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- Figure 3: Forecast UK market segmentation for accounting & financial management, by type of service, 2019-23
- Companies and brands
- ‘Big four’ account for over 80% of top 20 firms’ UK fee income
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- Figure 4: Top 10 accounting firms in the UK, by fee income, 2018 (% of top 10 fee income)
- Mid-tier firms are on consolidation course
- Acquisitions, partnerships and alliances revolve around the technology space
- What we think
Issues and Insights
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- Audit market set to see further reforms as lack of competition at the top end remains major concern
- The facts
- The implications
- Accounting firms continue to build on their advisory capabilities and multi-disciplinary skills
- The facts
- The implications
The Market – What You Need to Know
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- Value of UK accounting and financial management market reaches an estimated £26.38 billion in 2018
- Consultancy drives overall market growth
- Lack of competition in FTSE350 audit market remains a major concern
- Increased demand for tax advice and compliance services
- Corporate finance & business recovery services sector accounts for 11% of total UK accounting & financial management fee income
Market Size
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- Overview
- The Brexit effect
- Accountancy firms adopt new business models to expand, diversify or specialise
- UK accounting and financial management market shows consistent annual growth
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- Figure 5: The UK market for accounting & financial management, 2014-18
- Figure 6: The UK market for accounting & financial management, 2014-18
Market Segmentation
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- Overview
- Consultancy services command a rising share of UK accounting and financial management market
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- Figure 7: Segmentation of the UK market for accounting & financial management, by type of service, 2014-18
- Figure 8: Segmentation of the UK market for accounting & financial management, by type of service, 2014 and 2018
- Audit & accounting
- Audit market reforms fail to deliver increased competition, as ‘big four’ continue to dominate FTSE 350 market
- Audit market expected to see further reforms to improve competition
- Opportunities open up for mid-tier firms to compete for non-audit work for FTSE companies
- Recent developments in FTSE 350 audit contracts
- Rise in audit threshold putting pressure on lower end of auditing market
- Audit fees at lower end of the market remain squeezed, but fees are more stable at the top end as competition focusses on quality of audits
- Auditors invest in innovative technology solutions to deliver continually higher audit quality and deeper insight
- Audit and accounting services sector sees moderate annual increase in UK fee income
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- Figure 9: UK fee income from audit & accounting services, 2014-18
- Tax services
- Government clampdown on tax avoidance schemes
- Regulatory changes and tighter tax rules stimulate demand for tax advice and compliance services
- Implications of Making Tax Digital for accountants
- UK fee income from tax services up by an estimated 5% in 2018
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- Figure 10: UK fee income from tax services, 2014-18
- Consultancy
- Accountancy firms expand consultancy and advisory functions through strategic acquisitions
- Technology, analytics and digital play important role in consultancy services
- Some accountancy firms target advisory services specifically at SME sector
- Move towards “integrated services model” sees firms facing increased competition from legal services firms
- Brexit-induced uncertainty stimulates demand for consultancy services
- UK fee income from consultancy services grows by nearly 30% between 2014 and 2018
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- Figure 11: UK fee income from consultancy services, 2014-18
- Figure 12: UK fee income from consultancy services, 2014-18
- Corporate finance & business recovery
- Demand for restructuring services resurges as economic conditions turn more uncertain
- Tougher trading conditions and economic uncertainty see business distress levels trend upwards
- Brexit could challenge UK’s leading position in cross-border restructuring
- Buoyant M&A market drives recent growth in corporate finance & business recovery services sector
- Corporate finance & business recovery services sector accounts for around 11% of total UK accounting & financial management fee income
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- Figure 13: UK fee income from corporate finance & business recovery services, 2014-18
- Overseas trade in accountancy services
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- Figure 14: International trade in accountancy services, 2013-17
- Figure 15: Exports and imports of accountancy services, 2013-17
Market Forecast
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- While the economic outlook remains cautiously optimistic, Brexit uncertainty will continue to impact business and investor confidence
- Acquisitions, partnerships and alliances set to revolve around the technology space
- UK market for accounting and financial management is expected to demonstrate moderate annual growth over next five years
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- Figure 16: Forecast UK market for accounting & financial management, 2019-23
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- Figure 17: Forecast UK market segmentation for accounting & financial management, by type of service, 2019-23
- Audit and accounting
- Investment in technology to remain key focus in audit sector
- Tax services
- Consultancy
- Corporate finance and business recovery
- Consultancy expected to remain key growth sector of accounting and financial management market
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- Figure 18: Forecast UK market segmentation for accounting & financial management, by type of service, 2019-23
The Impact of the Economy
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- GDP growth rebounds in Q3 but challenges remain
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- Figure 19: GDP growth rate, Q3 2014-Q3 2018, (% change on previous quarter)
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- Figure 20: Forecast GDP development, 2018-23
Market Trends
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- Adoption of new technologies to drive increased automation and improved quality of audits
- Lower end of the audit market is becoming increasingly uneconomical for auditors
- Accounting firms continue to build on their advisory capabilities and multi-disciplinary skills
- Digital technology represents a key driver for the consultancy services sector
- Strong demand for cyber security advisory services, as ‘big four’ are now largest cyber security consulting firms globally
- Regulatory and risk consultancy services continue to show strong demand growth
- Large accountancy firms expand into marketing services industry via acquisitions
- Large accounting firms move into legal services
- ‘Big four’ legal teams at forefront in investing in LawTech
- ‘Big four’ tap into start-up and SME market
- Adoption of cloud accounting software is becoming more widespread across businesses of all sizes
- ‘Big data’ and data analytics represent key growth areas for accountants
Regulatory and Legislative Environment
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- Industry regulation
- Audit market reforms aim to open up market to increased competition
- Audit market is facing further reforms amid serious competition concerns
- More companies are exempt from audit as thresholds are raised
- New UK accounting standards
- Crackdown on tax avoidance
- Companies Act shake-up
- Scottish tax devolution
- HMRC move towards digital tax services
Market Drivers
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- Number of active businesses in the UK
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- Figure 21: Number of private sector businesses in the UK, 2004-18
- Figure 22: Number of private sector businesses in the UK, 2004-18
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- Figure 23: Number of VAT and/or PAYE registered enterprises in the UK, by industry group and turnover size band, 2017, (Number and £000)
- Rapid rise in self-employment since 2008 financial crisis
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- Figure 24: Self-employed workers in the UK, 2007-18, (000s and %)
- Insolvency rates are edging upwards
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- Figure 25: Number of company insolvencies, receiverships and administrations in England & Wales, 2008-18
- Corporate credit conditions
- UK M&A market remains resilient, despite uncertain economic and political backdrop
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- Figure 26: Mergers and acquisitions involving UK companies, 2005-18
- Number of listed companies on a downward trend
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- Figure 27: Number of main market and AIM listed companies, 2008-18
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- Figure 28: Number of main market and AIM listed companies, 2010-18
Companies and Brands – What You Need to Know
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- Mid-tier firms are on consolidation course
- Major mid-tier firms BDO and Moore Stephens set to merge
- Grant Thornton to no longer bid for FTSE350 audit work
Industry Structure
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- Overview
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- Figure 29: Top 20 accounting firms in the UK, by fee income, 2018
- Number of audit firms gradually declining
- Mid-tier firms are on consolidation course
- Industry structure
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- Figure 30: Analysis of the changes in the structure of the UK accounting, bookkeeping, auditing and tax consultancy industry, 2013-17
- Structure by employment
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- Figure 31: Analysis of the employment structure of the accounting, bookkeeping, auditing and tax consultancy industry, 2017 and 2018
- Structure by turnover
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- Figure 32: Analysis of the financial structure of the UK accounting, bookkeeping, auditing and tax consultancy industry, 2017 and 2018
- Figure 33: Analysis of the financial structure of the UK accounting, bookkeeping, auditing and tax consultancy industry, 2018
Competitive Strategies
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- BDO and Moore Stephens in advanced merger talks to create the largest UK accountant and business adviser focused on mid-sized businesses
- Deloitte combines nine European member firms to support clients’ closer integration between countries
- EY acquires Riverview Law as firm works to expand its legal offering
- Grant Thornton to no longer bid for FTSE350 audit work as market is “extremely difficult to penetrate”
- PwC’s digital transformation sees step change with significant investment in cloud-based technologies
- EY announces major investment in technology solutions
Company Profiles
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- BDO LPP
- Targeted approach to technology sees BDO focus on automation, analytics and innovation
- BDO and Moore Stephens in advanced merger talks to create the largest UK accountant and business adviser focused on mid-sized businesses
- Company performance
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- Figure 34: Financial Analysis of BDO, 2014-18
- Deloitte LLP
- Deloitte combines nine European member firms effective from 1 June 2017
- Recent acquisitional activity, investments and partnerships
- Deloitte follows rivals into legal services market
- Financial performance
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- Figure 35: Financial Analysis of Deloitte, 2014-18
- Figure 36: Segmental turnover analysis of Deloitte, 2018, (£million and %)
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- Figure 37: Turnover analysis of Deloitte, by industry, 2018, (£ million and % of total)
- Ernst & Young LLP
- Financial year 2017 sees record investment in technology by EY
- EY acquires Riverview Law as firm works to expand its legal offering
- Financial performance
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- Figure 38: Segmental turnover analysis of EY, 2018. (£million and % of total)
- Figure 39: Financial analysis of Ernst & Young, 2014-18
- Company strategy
- Grant Thornton UK LLP
- Grant Thornton restructures to serve three strategic markets
- Grant Thornton to no longer bid for FTSE350 audit work
- Financial performance
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- Figure 40: Segmental turnover analysis of Grant Thornton, 2018
- Figure 41: Financial analysis of Grant Thornton UK, 2013-17
- Company strategy
- KPMG LLP
- Recent notable UK acquisitions
- Financial performance
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- Figure 42: Segmental revenue analysis of KPMG, 2018
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- Figure 43: Financial Analysis of KPMG, 2014-18
- PriceWaterhouseCoopers LLP
- Recent acquisitional activity
- Investment in technology continues
- Financial performance
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- Figure 44: Segmental turnover analysis of PwC, 2018, (£million and % of total)
- Figure 45: Financial analysis of PwC, 2014-18
- Company strategy
- RSM UK Holdings
- Company performance
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- Figure 46: Segmental turnover analysis of RSM UK Holdings, 2017
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- Figure 47: Financial analysis of RSM UK Holdings, 2014-18
- Company strategy
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Methodology
Further Sources and Contacts
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- Trade associations
- Association of Chartered Certified Accountants (ACCA UK)
- Chartered Institute of Management Accountants (CIMA UK)
- Chartered Institute of Public Finance Accountancy (CIPFA)
- Institute of Chartered Accountants in England and Wales (ICAEW)
- Institute of Chartered Accountants Scotland (ICAS)
- Trade magazines
- Accountancy Age
- CCH Daily inc. Accountancy Live
- Tax Advisor
- Taxation
- The Accountant
- Trade events
- Accountex 2019
- CIPFA annual conference 2019
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