n top 25 survey BRIEFING august 2018 accountancy CULTIVATING GROWTH 8 Demand hange is inevitably coming to the accounting sector and those firms for services that fail to prepare early or adapt are is strong, at risk of being left behind. Warnings 2017 reaching $200.12bn (£150.80bn) (2016: Cover advanced technologies, skill shortages and $188.53bn), representing an aggregated 6% despite the greater complexity in business can be heard rise in fee income on the previous year. The across the global sphere, with particular focus year-on-year growth indicates that demand for challenges of on what has been described as the ‘fourth services remains strong, backed up by almost technology, industrial revolution’ as technology continues to universal increases in fee income across the develop at an alarming rate. Top 25 networks and associations. Brexit and ‘The impact of artificial intelligence (AI) on Just two across the Top 25, DFK International retention. the profession will be immense. Programs (ranked 22nd) and AGN International (23rd), will be able to handle accounting files, check reported revenues down on the previous year, Amy Austin contracts and come up with solutions for clients compared with three networks and associations investigates within seconds. Those firms ignoring AI or those last year. There have also been changes at the banking only on AI will potentially struggle,’ bottom of the table as MSI Global Alliance takes explains Michael Reiss von Filski, global CEO at the 25th spot away from IAPA. Geneva Group International. Another disruption comes in the form of DELOITTE ON TOP Brexit and what will become of audit and Although there is a heightened level of accounting standards after the UK leaves the change and uncertainty throughout the EU. There are also moves within individual global profession, the Big Four frontrunners firms as more turn their attention towards remain the same in this year’s Networks and offering legal services. Associations Survey, with Deloitte Touche The addition of these services and various Tohmatsu maintaining its lead over PwC, after it mergers across the year has resulted in leapfrogged the firm in last year’s survey. combined global revenue for the Top 25 As the world’s largest network, Deloitte had networks and associations in the financial year an overall growth of 5.4%, driving its fee income www.accountancydaily.co accountancy august 2018 BRIEFING top 25 survey n There is a corresponding risk associated with lack of independence and conflict of interest concerns when one begins to merge too many disciplines Richard Attisha, president and‘ CEO, TAG Alliances Increasing disruption, complexity and the exponential speed of change happening globally are creating unprecedented challenges David Cruickshank, global chair, Deloitte ‘ 9 As we have grown, extra challenges have been placed upon our staff and we need to bring in more people, to a record $38.8bn (2016: $36.8bn). The gap particularly with between Deloitte and PwC, whose fee income technology‘ expertise has hit $37.6bn (2016: $35.89bn), now stands at Paul Korolkiewicz, board $1.12bn (2016: $910m). to seventh with fee income of $5.2bn, up member, KPMG UK EY maintains its lead over KPMG with revenue 9.5% from last year’s figure of $4.7bn. As a hitting $31.4bn (2016: $29.6bn), a growth of 6%, result, RSM International has dropped one compared to KPMG whose fee income increased place to eighth place with $5.1bn, although 3.9% to hit $26.4bn (2016: $25.4bn). this figure is still up 4.7% on last year’s $4.9bn. David Cruickshank, Deloitte global chair, says Grant Thornton International has also dropped that the success of its multidisciplinary business one place to ninth with $5.0bn. model has helped drive this year’s financial BDO LLP and Geneva Group International results. ‘Increasing disruption, complexity and (GGI) have held on to fifth and sixth spot, the exponential speed of change happening respectively, with a 6.5% increase in revenue to globally are creating unprecedented challenges $8.10bn for BDO, while GGI shows a modest for clients,’ Cruickshank says. ‘Deloitte’s global 2.4% rise to $5.4bn in fee income in 2017. strategy was developed with this era of constant change in mind. It is designed to ensure that LEGAL SERVICES we are not only positioned to survive in this The groups have been broadening their emerging business landscape, but to thrive in it.' multidisciplinary skills as a way of bringing in In July 2018 Deloitte restructured its Asia- additional revenue via mergers and acquisitions, Pacific business into a single operation similar or through growing existing practices internally. to the set-up in North West Europe. ‘Our focus One area that has become increasingly popular on local markets has always been a strength,’ is legal services, with more firms rushing to explains Cruickshank. offer clients this bespoke service. Big Four dominance is as prevalent as ever ‘Looking ahead, we feel more firms, with combined fee income hitting $134.2bn, a especially in Europe, Asia-Pacific and Latin 5% increase on $127.7bn in 2016, accounting America, will continue to move into the legal for 67% of total Top 25 income. and consulting space. We have seen this There has been greater movement among the shift taking place among the Big Four and mid-tier groups with Praxity jumping two places other large international firms,’ explains 10 www.accountancydaily.co n top 25 survey BRIEFING august 2018 accountancy 1 Deloitte INTERNATIONAL NETWORKS $38.80 ($36.80bn) TOP 10 AND ASSOCIATIONS 2018 5.4% Deloitte holds off the advances of arch rival PwC to remain the world’s largest accountancy network, with FINANCIALS growth of 5.4% driving its INTERNATIONAL TOP TEN: FEE INCOME ($BN) 2017 (2016) fee income for the year to a record $38.8bn, up Rank Firm 2017 Variance Y-o-Y 2016 2015 2014 2013 2012 from $36.8bn in 2016. 2017 2016 $bn $bn var % $bn $bn $bn $bn $bn Its consultancy service 1 (1) Deloitte 38.80 2.00 5.43 36.80 35.20 34.20 32.40 31.3 brings in the biggest share 2 (2) PwC Intl 37.68 1.79 4.99 35.89 35.36 33.95 32.09 31.51 of revenue at $14.3bn, 3 (3) EY Global 31.40 1.78 6.01 29.62 28.66 27.37 25.83 24.42 followed by audit at $9.4bn 4 (4) KPMG Intl 26.40 0.99 3.90 25.41 24.44 24.82 23.42 23.03 and tax and legal at $7.3bn. 5 (5) BDO Global 8.10 0.50 6.58 7.60 7.30 7.02 6.45 6.02 Asia-Pacific revenue grew 6 (6) Geneva Group Intl 5.37 0.13 2.48 5.24 5.06 4.83 4.59 4.39 fastest among the regions at 9%, followed by Europe, 7 (9) Praxity 5.19 0.45 9.49 4.74 4.51 4.36 4.08 3.72 Middle East and Africa at 8 (7) RSM Intl 5.09 0.23 4.73 4.86 4.59 4.39 3.71 3.99 8.6%, and the Americas at 9 (8) Grant Thornton Intl 5.00 0.21 4.38 4.79 4.63 4.73 4.52 4.18 5.6%. Global headcount has 10 (10) TAG Alliances 4.50 0.50 12.50 4.00 3.80 3.36 3.20 3.02 grown 8%, with 69,900 new Total fee income 167.53 8.58 6.05 158.95 153.55 149.03 140.29 135.58 hires bringing its total global 10 headcount to 263,900. GGI Global FINANCIALS 6 TOP 25: TOTAL REVENUE ($BN) Alliance 200.1 $5.37bn ($5.24bn) 200 $bn 180.9 183.9 184.4 166.1 170.9 2.5% Geneva Group 150 125.4 128.2 116.7 118.6 International, which has 584 member firms and 100 817 offices worldwide, has grown revenue to $5.37bn, 50 up 2.48% year-on-year from $5.24bn in 2016. Global revenue is split 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 between accounting and legal services at 61% and 39%, respectively. The association of international audit, accounting, law and consulting firms employs Richard Attisha, president and CEO of TAG 28,007 professional staff $200.1bn Alliances. ‘Clearly, there is value in having a and 3,905 partners across single point of contact for various professional 124 countries. In the UK, GGI has six accounting and services; however, there is a corresponding four law firm members. risk associated with lack of independence and Total conflict of interest concerns when one begins fee income to merge too many disciplines.’ globally for the In June 2018, Deloitte became the last Top 25 is $200.1bn, of the Big Four networks to be awarded an up 6% year-on-year, alternative business structure (ABS) licence in would rank as the sixth largest legal service with the Big Four the UK as part of the firm’s plans to break into provider in the world in terms of total number of networks accounting the legal services market. PwC, EY and KPMG lawyers, if counted as a standalone entity. for $134.2bn in revenue were all awarded licences in 2014. ABS licences allow companies to run their DIGITAL ERA own legalarms, while also permitting law firms Changes to technology are expected to hit to accept external investment and to be owned the accounting industry the hardest with the by non-lawyers. profession currently grappling to understand According to research from ALM Intelligence, and develop technologies such as automation, PwC has the largest legal offering with 2,500 artificial intelligence, blockchain and, more (grrrr) lawyers in 85 countries, with KPMG following recently, cryptocurrencies such as Bitcoin.