Grant Thornton has become the first big accounting firm to report a fall in profits in 2008, blaming the economic downturn and the cost of its merger with Robson Rhodes.

The UK's fifth biggest firm by fee income said pretax profit fell 5% to £72m for the financial year to 30 June 2008, although fee income jumped 25% to £394.1m, helped by the first contribution from Robson Rhodes after the rival firms merged in July 2007.

The profit fall is the latest evidence that the accountancy profession faces a tough 2009 as the UK economy slides into recession. Accounting firms including Grant Thornton, Deloitte and PKF, have announced plans to cut hundreds of jobs in expectation of slower revenue growth this year.

Scott Barnes, who formally takes over as Grant Thornton CEO in January, said in a statement: 'I am very pleased with our growth in fee income given that it has been a challenging year.'

He added that achieving Grant Thornton's target of making £500m in fee income in 2010 would be 'very tough' given the worsening economic conditions but said he was confident about the firm's strategy.

'Our aims have not changed, simply the timescale and strategy needed to address market conditions,' he said. 'Given clear focus and the capabilities of our people I have great confidence in our direction.'

Grant Thornton's audit and assurance practice grew 44%, corporate recovery by 19%, tax services by 18% and corporate finance by 12%.