Top 50 + 50: top of the pile

If you thought that 2009 had been a tough year for the UK’s top accounting firms, it’s got nothing on 2010.

The picture emerging from the 2010 Accountancy Age Top 50 + 50 survey is that the going has become even harder over the last 12 months, despite the UK economy emerging from recession.

Turnover for the largest 50 firms grew just 3% over the past year, and the situation was even worse for the next 50 practices in our survey (see page 16). But even this nominal growth figure fails to tell the whole story of what has been an incredibly difficult time for almost all firms.

Of the 29 firms that managed to register any rise in turnover this year, only seven posted double-digit percentage growth on the last twelve months. More worryingly, two firms saw revenues stagnate while 17 experienced falls – double the the number of firms that registered negative growth in 2009.

Among the Big Four the situation was no better. Last year’s combined turnover of £7.16bn was surpassed by just 1%, growing to £7.23bn, largely down to a strong performance by Ernst & Young. The smallest of the Big Four grew fee income by nearly 8% to £1.38bn.

By comparison, the country’s second largest firm, Deloitte, saw revenues slip back below the magic £2bn mark, down 2% to £1.97bn, following big drops in its take from tax and corporate finance services. The fall has given leading firm PwC some breathing space at the top of the table, much needed as PwC could only manage growth of 0.2% to £2.25bn. KPMG could soon see E&Y snapping at its heels after dropping 1.6% to £1.63bn.

There were some positive stories to emerge from the Top 50. RSM Tenon, following the acquisition of Bentley Jennison, overtook Baker Tilly and Smith & Williamson to place 7th in our table. Figures provided by the firm show a huge 49% growth in turnover to £225m, although this is 6.5% lower than the combined totals of the two businesses from last year’s survey.

Moore Stephens in 11th position also saw strong growth, up 10% to £139m. Impressive upswings in tax and audit more than made up for some big falls in consultancy and corporate finance fees.

Insolvency specialists Begbies Traynor (14th) also thrived as the number of administrations skyrocketed over the last year, growing turnover by 13% to £70m. Reeves + Neylan also performed admirably, jumping five places in the table to 40th on 14.5% growth and revenues of £14.8m.

Undoubtedly one of the biggest success stories from this year’s Top 50 is the continued rapid rise of London-based Frank Hirth. Just two years ago, the listed accounting company languished at number 56 in our table. Having broken into the Top 50 last year following 12% growth, it has now jumped again to 39th with an impressive income rise of 31% to £15.6m. The firm has continued to capitalise on serving US financial services expats now working in the City.

There have also been some new entrants into the Top 50. After several years of knocking on the door, SJD Accountancy has finally made it into the big league, registering revenues of £12m, 9% up on last year. Turnaround specialists MCR and tax advisers TaxAssist Accountants are new participants and have entered the table at 27th and 34th respectively. Both posted strong double-digit growth in their first appearance in the table. Others have had a much tougher time.

Haslers just managed to cling on to its Top 50 status. Last year, the firm placed 38th in the table, but could only manage 49th this year following a 19% drop in revenue to £11.9m. Large falls in income from tax and corporate finance were to blame, while audit also suffered.

Baker Tilly (8th) also suffered drops in the same service lines, with revenues overall down 7% to £190m, while Armstrong Watson (31st) saw falls of 8.5% to £17.3m
Across the service lines, the story was all too predictable. From the figures provided by the firms, both consultancy and corporate finance saw overall drops – down on average 0.6% and 6.8% respectively. Insolvency, unsurprisingly, saw an average boost of 6.7% while audit held up well (3.8%) and tax was largely stagnant (0.4%).

There is still hope among the firms, however. Most believe credit facilities have not worsened over the last year, few expect there to be a double-dip recession, and more than half expect partnership profits to improve next year. Next week’s Budget could easily change those views, but for now the firms are cautiously optimistic about the future.

View the Top 50 table

View the +50 table