Accountancy drives service sector fall

Weakening output from accountancy was among the drivers for a poor
performance in the service industry during the past quarter, according to the
latest Office for National Statistics figures.

Service sector output increased by just 0.3% in the three months to April,
the lowest rise in over 12 years. Within the sector, business services and
finance ­ the category in which accounting is included ­ fared the worst, with a
drop of 0.3% on the previous three months. Output from other business services
division, which includes accountancy, legal services and market research in
particular, showed significant decreases.

Phil Shohet, director of Kato consultancy, said the figures were not
surprising in the current climate.

‘Clients are becoming more fee resistant. They are not accepting added value
work,’ he said. ‘They have to have their compliance work done, but it is some of
the special work they are resisting.’

Shohet said demand for accountancy services would further decline over the
next six to 12 months.

The National Statistics figures, which point to a slowdown in growth in
accountancy, are in line with Accountancy Age’s Top 50 survey results published
last month. This year’s survey revealed the growth rate has dropped
significantly, from double-digit growth in 2006 and 2007 to a more modest 5.7%.

Some firms plan to tackle this downturn by halting recruitment. Research by
cvmail found that 57% of the UK’s Top 100 accounting firms did not intend to
increase headcount over the next year. The majority of these aimed to maintain
current staff levels, though 5% planned to cut staff.

Andy Eddleston, commercial manager at cvmail, said the slowdown was more
pronounced in some sectors. ‘The effect of the credit crunch on top firms has
been felt in a slowdown in corporate finance work and may feed into consultancy
work. But their core audit & assurance and tax work should be largely
unaffected,’ he said.