What are the prospects for accounting service lines and how can they protect the firms as the economy faces a downturn?

This question is worrying many in the profession. With economists predicting, at best, a ‘correction’ in the UK’s prospects and at worst a recession, which service lines are ‘recession-proof’ and which are not?

Tenon and Vantis have already suffered as a result of the credit crunch, not because of damage to their revenues, but because the market has lumped them in with the rest of financial services industry.

As a result, their share prices have plummeted. Tenon’s share price has fallen from a high of 62p in November, to 52p last week. Vantis’ price was at 220p in July, just before the credit crunch began to impact. It is less than half that now.

But as the industry’s only two quoted firms, and thus the first to be affected by market sentiment, Vantis and Tenon are perhaps the best placed firms to give a view about the prospects for the sector and what the crunch means for the profession?

Analysts actually think that the firms have decent prospects in the event of a downturn.

Vantis analyst Ben Archer at Charles Stanley says the stock is more ‘defensive’ (the term for a stock that investors turn to for stability in troubled times) than some.

‘One of its biggest services is business recovery or business insolvency, which is counter-cyclical, a compensation for downturn in other areas,’ he says. ‘We would expect tax advice to be defensive; corporate finance would be more sensitive. The range of services and clients and sectors provides the diversity and defensiveness.’

James Hamilton of Numis, Tenon’s house broker, says: ‘Tenon has changed the mix of its business with significant growth in insolvency and recovery. This area is counter-cyclical and should do much better in a recession with increases in SME insolvency.

‘Clearly there are parts of Tenon which are pro-cyclical: corporate finance is an obvious area where you could see revenues weakening in a recession. There are other parts of the group ­ which could see lower revenues ­ clearly if you are, as a personal individual not making significant capital gains, or your income is reduced, your need for tax planning services is reduced.’

That may be the concern for some. Poor economic prospects mean fewer budding entrepreneurs ­ at the heart of Tenon’s strategy, if not those of other firms.

Andy Raynor of Tenon remains upbeat. ‘It would be very arrogant for any business to say it was recession proof ­ but we are pretty resilient,’ he says.

In tough times, he points out, it is more important than ever to know what your financial position is. ‘If they are finding things tighter they will come to the people they trust for advice.’

Neil Owen of Robert Half thinks some areas of accounting work may see lower demand, but that the area is pretty robust in recruitment terms.

‘We have seen some issues of smaller hedge fund and larger banks discontinuing funds in certain areas and therefore aren’t hiring ­ they’ve stopped hiring accountants and middle and back-office staff.’

‘People are being a bit more strategic and putting relevant controls in before they hire. Accountants are now seen as strategic business decision makers, not just number crunchers. If companies need to cut costs… they will need accountants. Good accountants, who are commercially aware and technically aware, will always be in demand.’