n top 75 firms survey BRIEFING february 2015 accountancy When Baker Tilly did its analysis to ensure future growth, we could see RSM I’m under was the right network. no illusion It’s not just about size – if you Laurence Longe, senior look at our FTSE partner, Baker Tilly 100 share, from the ‘‘ start of mandatory tendering, over a cycle of five to 10 ‘‘years, PwC must lose market share Ian Powell, senior partner, PwC Businesses are being more cautious than the environment would suggest, but confidence is stronger than it was 8 ‘‘Scott Barnes, CEO, Grant Thornton CHOPPING AND CHANGING artners in the UK’s top 75 accountancy ‘We have seen growth across all our lines of Regulation- firms must be feeling happy with service, and right across the country,’ says Ian driven audit their performance, having weathered Powell, senior partner of PwC, which maintains the recessionary storms of recent its position as the largest UK accountancy firm tendering, Pyears to emerge in a strong position to tackle with £2.8bn in fees and some 18,000 members strategic the uncertainties of the coming year. Widely of staff. ‘Some parts of the firm have seen regarded as a bellwether for the UK economy – double-digit growth,’ Powell explains, ‘such as acquisitions when their clients do well, the firms do well – the in Scotland, where fees grew by 16%.’ and network accountancy sector has recorded solid growth Powell points towards the so-called Northern in fee income over the past 12 months, with Corridor, linking cities such as Manchester changes many senior partners now preparing for further and Leeds, as an area of particular potential indicate a demands on their skills across the board. for the firm, where there has been an increase According to the latest Accountancy Top 75 in technology-based and other innovative different survey, fee income has increased by a healthy businesses, rather than a return to more landscape 6% compared with the previous 12 months to traditional industries following the recession. reach more than £12bn (£11.5bn in the previous ‘There’s a lot of really interesting technology for the UK’s year). Of course, some three quarters of that development going on here, and we are seeing income has been generated by just four firms – people investing in these areas,’ he says, top firms, the Big Four giants of PwC, Deloitte, KPMG reflecting the current government’s enthusiasm reports and EY – but very few of the other top 75 firms for a northern ‘powerhouse’. saw their income dip during 2014. Indeed, Philip Smith a number of firms have been able to report TENDERING double-digit growth. But the big development at this end of the The number of partners and staff employed league table has been the huge increase in audit by the firms has also increased amid reports tendering among the FTSE 350 companies, of a return to the ‘war for talent’ not seen and while many may have expected PwC to since before the financial crisis of 2008. In all, lose market share as a result of this increased there are now 6,122 partners in the firms in activity, the reverse so far appears to be the the top 75, up from 5,801 a year ago (2007: case. The firm has seen fees in audit and 5,324 total partners in the UK’s Top 60 firms; accounting push pass the £1bn mark, 4.4% up total fee income £8.8bn), while the number of on the previous year. Deloitte, meanwhile, has staff has increased from 79,792 last year to seen its fee income in this sector drop nearly 5% 87,135 this year. to £706m. But Powell is not complacent. ‘I’m www.accountancylive.com accountancy february 20152014 BRIEFING top 75 firms survey n There is a lot of turmoil in the international network and associations sector so we are hoping to benefit from that and offer We act for a third new members the benefit of the FTSE 350 of the PKF brand in the UK and should be ‘‘Jeremy Bowler, senior able to get to a position of partner, PKF Cooper Parry acting for half as we build and chairman, PKF UK confidence in our brand, but it is a long-term game Simon Michaels, ‘‘managing partner, BDO We have gone through a period of investment, so we now feel we are capable of more growth now that the UK economy feels like it is picking up 9 ‘‘Tony Cates, head of audit, KPMG CHOPPING AND CHANGING under no illusion – if you look at our FTSE 100 be inviting PwC to the tender party. At the same share, from the start of mandatory tendering, time, it is facing a Financial Reporting Council over a cycle of five to 10 years, PwC must lose investigation over the Tesco audit. market share. But I think people are recognising The other Big Four firms have also won and the investment that we have put into our audit lost audit accounts in the FTSE 350, but all have methodology.’ Over the course of the year, maintained overall fee income growth. Deloitte, PwC has won some significant audits, including the second largest firm, reported a modest 1.4% HSBC, Vodafone, Diageo and G4S. However, increase in fee income, while KPMG and EY saw it will in due course have to relinquish the audit income grow by 5.2% and 8.5% respectively. of Barclays, the firm’s largest FTSE 100 audit ‘I think there is more growth to come,’ says client, after the high street bank said it would not Tony Cates, KPMG’s head of audit. ‘The 10 BIG FOUR FEES BY SERVICE LINE Fee income: 3,000 £m 2,814 Audit and assurance 2,689 2,621 Tax 2,461 2,550 2,500 2,331 2,515 Consulting and corporate finance 2,329 1,909 2,000 1,814 1,868 1,703 1,806 1,721 1,598 1,631 1,500 1,329 1,205 1,186 1,072 1,000 500 893 634 804 0 909 645 907 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 PwC Deloitte KPMG EY 963 659 999 969 680 1040 1012 704 1098 www.accountancylive.com 628 511 459 397 481 957 1073 1033 309 370 722 759 848 804 907 999 1040 1098 459 517 1137 1210 1282 652 534 517 350 392 380 343 381 372 431 455 470 663 529 926 511 534 529 563 562 360 634 645 659 680 704 742 563 1001 458 456 469 434 495 403 444 478 507 550 706 562 1282 628 652 663 742 706 893 909 963 969 1012 458 350 397 456 392 481 469 380 925 434 343 1073 494 381 1033 Total of all three 403 360 309 444 372 370 478 431 722 507 455 759 550 470 848 n top 75 firms survey BRIEFING february 2015 accountancy INCOME BY SERVICE LINE TOP 75 AUDIT AND ACCOUNTING TOTAL INCOME OF TOP 75 FIRMS 25 % change 13 £bn 12.01 Note: 2012 to 2014 top 75, 20 6 12 2007 to 2011 top 60 11.48 11.03 4 11 15 10.33 9.92 18 9.82 3 19 10 9.36 10 9 16 17 20 8.80 11 9 1 13 5 5 12 15 8 10 14 0 7 7 8 -5 6 2007 2008 2009 2010 2011 2012 2013 2014 2 -10 Rank Firm £m £m % 2014 (2013) 2014 2013 change feeling is that we have gone through a period 1 (1) PwC 1,012.0 969 4.4 of investment, so we now feel we are capable 25 2 (2) Deloitte 706.0 742 -4.9 of more growth now that the UK economy 10 3 (3) EY 550.0 507 8.5 feels like it is picking up.’ 20 4 (4) KPMG 495.0 434 14.1 15 5 (5) Grant Thornton 135.2 131.1 3.1 ACQUISITIVE One area where Cates is expecting growth 10 6 (6) BDO 131.0 111 18.0 1 10 is in the SME sector, which is why the firm 5 7 (7) Baker Tilly 107.0 108 -0.9 8 (9) Moore Stephens 52.7 52.9 -0.4 is working with online accounting software 0 provider Xero to offer cloud accounting services 9 (8) Mazars 52.3 48.3 8.3 for small businesses. By supplying accounts, -510 (-) PKF UK3 36.9 n/a n/a bookkeeping, payroll, VAT and corporate tax -1011 (10) Crowe Clark Whitehill 36.2 34.4 5.2 10 4 services, the firm will be directly challenging the -1512 (11) Haines Watts Group 32.4 31.5 2.9 high street accountancy practices. 13 (12) UHY Hacker Young5 26.3 25.3 4.0 -20 The firm also signed a 10-year agreement 14 (13) Kingston Smith 23.3 23.3 n 0.0 and announced it was to be an innovation 15 (14) MHA MacIntyre Hudson 23.2 22.6 2.7 partner of Formula 1 racing team, McLaren 16 (15) Smith & Williamson2 22.6 21.1 7.1 10 Group. The expectation is that the pairing will see the audit firm apply the advanced 17 (16) Saffery Champness 19.9 18.6 6.8 predictive analytics and technology normally 18 (17) Wilkins Kennedy 19.3 17.6 9.8 used in Grand Prix races to improve audit and 19 (=19) Francis Clark 13.0 11.9 9.2 advisory services.