Top 50+50: From 2009 to 2014 – what has changed?

FIVE YEARS is a long time in business, and so it has been for accountancy firms serving it. When you take into account the longest recession on record, and attempts to turn the audit, tax and insolvency professions inside out, it’s amazing how resilient the profession has been since the financial crisis of 2008.

Comparing the Accountancy Age Top 50 2009 to our latest figures, it’s clear that some firms have managed to push on. The Top 50 in 2009 posted £9.6bn in fee income, compared to £11.37bn in 2014.

But this top-line stat doesn’t tell the whole story. The Big Four grew to £8.7bn in 2014, from nearly £7.2bn five years earlier. In other words, £1.5bn of the £1.7bn growth in fee income over that period related to them, with the ‘next 46′ creeping up £200m over that period. Yet with Grant Thornton and BDO swallowing up £133m of that growth in fees between 2009 and 2014, it’s clear that for many it has been five years of paddling furiously to tread water.

All change at the middle

The tier of firms below the top six has certainly changed between 2009 and 2014. Four of the firms between ten and 20 in 2009; Tenon, PKF, Vantis and RSM Bentley Jennison, no longer exist.

PKF has, this year, been reconstituted as a network of UK firms including Littlejohn, Cooper Parry and Johnston Carmichael. The remnants of Tenon and Vantis have been split, following numerous mergers and divestments – with Baker Tilly involved in the latest transactions. And PKF was merged into BDO more than a year ago.

Some high-flyers have taken their place. Saffery Champness has grown to a £65m firm, from £51.4m during the five year period. MHA Macintyre Hudson, which has worked hard on rebranding and setting up a branding association with other UK practices, has climbed to 18 from 21, with fees up to £41.8m from £30.9m.

Others have been solid but unspectacular. Haines Watts posted £62.8m for 2014, from £58.2m in 2009. Moore Stephens and UHY Hacker Young have also seen modest growth. Kingston Smith is nearly £1.5m down over the period, to £41.8m, while Begbies Traynor has really struggled as the usual counter-cyclical conditions for insolvency work haven’t materialised.

Can these firms step up to the plate as economic conditions improve? It’s a fascinating question, because the next batch of firms in the Top 50 is snapping at their heels.

‘Generalist’ firms have also performed at that level. Price Bailey (to £20.3m from £14.7m) and Reeves (to £21.2m from £12.9m) have consistently climbed the charts during the five years. Acquisitions have played a part in the fee growth of the two firms, according to Peter Gillman, former Price Bailey executive chairman and now independent consultant.

The firms also have regional office networks with more stable client bases. This method creates a mix of organic and acquisitive growth.

New model army

But the majority of the Top 30 firms that have come up on the rails during the past five years have a different way of doing things. TaxAssist Accountants, FRP Advisory, Frank Hirth and SJD Accountancy are all different firms with different structures and focuses. But they all have their own specialism. Where TaxAssist is a run as a high street franchise, Frank Hirth provides tax advice to UK/US cross-border businesses. The similarity is in their strong performance.

Demand from clients for sector expertise has driven these new firms up the charts, according to Gillman.

For other firms to go down such a route, the typical practice will have to refocus, and most likely give up parts of their business. “You will see profits go up but revenues down – yet be more stable,” says Gillman.

And with growth back on the agenda, what moves will the firms make?

What is clear is that clients are looking to grow, but want well-defined expertise. Firms are looking to grow, but are going through, or will have to, go through change to meet that demand. Such change will create opportunities and threats, winners and losers.

Expect a different list in a year’s time, more so in five.

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