International Rankings 2022: Groups cling on to growth amid geopolitical turmoil

View the top 25 international alliances and associations 2022 here, and the top 21 international networks here

The leading international accountancy networks and associations continue to report robust growth rates despite economic headwinds and a challenging geopolitical environment.

The top 27 international networks collectively reported fee income of $253bn in 2022, up 12.5% year-on-year. At the same time, the top 21 international associations and alliances reported a respectable 6.8% growth, hitting $43bn in fee income.

As in previous surveys, the Big Four international networks of Deloitte Touche Tohmatsu, PwC, EY and KPMG International dominate the landscape. Between them, they account for nearly $190bn, some 75% of the total fees among the networks. The next six, BDO, RSM, Grant Thornton, Crowe, Baker Tilly and HLB, which round out the top 10 networks, between them recorded $40bn. While all the top 10, and indeed most other networks reported healthy increases in fees, there are signs such growth rates could be weakening.

In December, KPMG became the latest network to report its 2022 figures, showing a more modest 8% growth rate. But its year end in September 2022 is later than the other Big Four, and so better reflects the impact of the war in Ukraine and ongoing global inflation, both of which are stoking recessionary fears.

The recent figures from BDO and Grant Thornton, which also reported in December, reveal another set of single-digit growth rates. Fluctuating exchange rates have ha impact, too – local currency figures still suggest double-digit growth, and the strength of the US dollar has affected the value of non-USD fees.

“These results highlight the value of our continued focus on our network strategy and its ability to deliver sustainable growth for the network, despite another challenging year in many markets,” says Peter Bodin, CEO of Grant Thornton.

Russia-Ukraine war drives uncertainty

Francesca Lagerberg, the newly installed CEO at Baker Tilly, shares Bodin’s views.

“We are hopeful that we will see some growth in difficult times. What is happening in Europe, a war that everyone had hoped wouldn’t happen, and the knock-on vibrations is bound to have an impact,” she states.

“And of course, there are recessions taking place in many parts of the world. But we are looking solid.”

Like many other accountancy organisations, Baker Tilly pulled out of Russia in March.

“We had to take action and do the right thing for the global network,” Lagerberg adds.

On the client front, she says the network had to look “very carefully at each of the relationships, and make sure we were compliant with any sanctions.”

‘It is the curse of geopolitical changes, you have to move quickly, you have to make the right decisions, even if sometimes they are hard decisions.”

However, Lagerberg also sees a growing need to support clients through these difficult times. “Volatility drives opportunity as well as challenges,” she says. “Even during downturns, we have something to offer.”

ESG moves up the agenda

One such opportunity, highlighted by many of the networks and associations in the survey, is ESG. Environmental, social and governance issues – and how clients can report on them, are very much the flavour of the year. With the advent of international sustainability reporting standards, there is a clear need for international consistency and appropriate levels of comparability, and accountancy professionals feel they are in the right place, with the right skills, to help their clients.

“ESG will be a big opportunity in the future and agility is the key” says Steve Heathcote, CEO of PrimeGlobal.

As well as helping his member firms continue to deliver existing services, he says his association is helping the shift into services that will grow in the future.

“The Taskforce on Climate-related Financial Disclosure (TCFD) rules are coming through, and we can see a change in the firms’ attitudes, they are now thinking about how they can support their clients.”

He adds that there are also new opportunities for SMEs.

“It is a big opportunity for our firms as larger businesses push sustainability through their supply chains. Assurance of ESG reports is also an emerging opportunity, particularly if there is a requirement that the ESG report cannot be audited by the incumbent financial statement auditor. The market potential could be significant.”

“We see this as a growing opportunity as we increase the number of firms, and advisers, who can support business globally with ESG. Our firms are exploring ways to collaborate globally to help clients address sustainability goals. And we will be the first association this year to issue our own impact report and a guide to help firms and small business adopt B Corp principles.”

The pandemic continues to affect operations

Of course, this activity is set against the backdrop of the global Covid-19 pandemic, the reverberations of which continue today. Many of the global organisations have reported in the past how they were helping their member firms deal with the pandemic – both in terms of helping their clients but also in helping themselves.

“The last three years represent a period of extreme uncertainty where all aspects of people’s lives have been disrupted – personally, socially, culturally, and collectively as businesses. Successful member firms have shown resilience, flexibility, quick thinking, and strong leadership,” David Mellor, CEO of Crowe Global, says.

“As a network we had already launched a digital transformation project across our membership before the coronavirus pandemic hit, and this helped our members with their response to office closures and remote working. As a network we found that willingness to collaborate between our members was strong to support each other in extreme circumstances”

Talent shortages persist

Aside from war and disease, one of the biggest challenges facing many networks and associations is talent – a chronic shortage of trained, qualified professionals is placing a strain on existing resources, both human and financial.

As Liza Robbins, CEO of Kreston Global, says: ‘Attracting and retaining talent is an ongoing challenge in many markets. Tech firms and start-ups are competing hard and can offer flexible working in a great environment with opportunities for development. Accounting firms will need to meet these expectations against a backdrop where much of the mainstream media coverage of the profession is not positive. Firms will need to work hard to communicate the benefits of the business exposure gained from working in the profession. The positive contribution the profession makes to society as a whole needs to be well communicated.’

Kenny Young, CEO of Morison Global, agrees. He says: ‘I feel that the challenges of attracting people into our profession is a structural problem that needs to be urgently addressed. Technologies are advancing at a rapid pace and can provide the tools we need to perform more efficiently but they can’t replace the human interaction that is so important to the work we do for our clients.’

The Big Split

One development that could affect how attractive the profession remains comes in the form of EY’s plans to split it assurance and advisory services into two separate organisations. It has long been held that multi-disciplinary firms were attractive to new talent as they offered a wide selection of career opportunities (and the international dimension of the networks and associations added the opportunity for world travel as well).

But this could all change if EY succeeds in its bid to split itself asunder. Of course, EY argues that the opportunities available would remain, as there is an ever-increasing demand for specialist skills in assurance.

But that aside, the move could have other implications for the other global organisations. Although no other network has announced similar plans, regulators could force a change. Already in the UK, the Big Four firms are being required to operationally separate their assurance practices from advisory services, though the next tier of firms are still awaiting guidance on this issue. It is entirely possible that if this market intervention is successful (and indeed if EY is successful in its own moves), then others – both regulators and individual networks and firms within those networks, will follow suit.

Advisory fees continue to drive revenue

One thing is clear, however: if EY does split itself up (and remember it succeed in 2000 when its consultancy division was sold to Capgemini), then a large chunk of fees will be removed from this survey. But it would only drop the network down to fourth place, as its assurance services alone account for more than $14bn, almost three times as much as BDO’s total fee income.

It is still interesting to note that ‘business advisory services’ is the dominant business line for the networks – the top 27 networks earned $108bn in business advisory, while assurance services brought in $82bn with tax and legal services adding a further $56bn. The associations figures are more skewed in favour of assurance ($15bn), with tax and legal bringing in $10bn and business advisory adding just $6bn.

These market moves could add an interesting dynamic, particularly if they are accompanied by further regulatory intervention. Some see it as an opportunity: ‘The regulatory interventions will create more opportunities for our firms and we’ve seen that with the increase in client enquiries that our firms are fielding,’ says Morison’s Young.

A new challenger on the list

Finally, it is important to note the arrival of a new network in the survey. CLA Global, which originally consisted of two firms, broke away from Nexia this year. The two firms – Evelyn Partners (formerly Smith & Williamson) in the UK and CliftonLarsonAllen in the US – still managed to break into the top 15 with fee income of $2.2bn. However, the network has since been joined by Singapore-based accounting and professional services firm Nexia TS, which will rebrand as CLA Global TS.

Joe Kask and Sancho Simmonds, co-CEOs of CLA Global, told Accountancy Age: ‘CLA Global is significant to the broader industry, filling a gap among top global organisations with its keen focus on fast-growing, innovative, and dynamic middle-market cross-border businesses, while also concentrating on assisting international public interest and listed entities.

‘The call for global services is getting louder every day – highly integrated capabilities that can address dynamic global markets and can help clients grow, scale, and operate on a global level.’

Over the years, there have been mergers both at international and country levels, which continue to shift and shape the landscape of international networks and associations.

There are always concerns that the global economy will present challenges to all the networks and associations, which can have a more dramatic impact on the fortunes of these organisations. As they prepare to face the challenges of 2023, however, the organisations enter the new year in good financial shape.

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