PracticeConsultingTOP 50 – Ahead of the rest

TOP 50 - Ahead of the rest

Accountancy Age provides its annual insight into the financial performance of the UK's leading firms. Research by Liz Loxton, analysis by staff writers.

When Accountancy Age surveyed UK practices for its Top 50 leagueerformance of the UK’s leading firms. Research by Liz Loxton, analysis by staff writers. table last year, we were met with a stony silence from some members of Group A, plus the then newly-formed PricewaterhouseCoopers and Arthur Andersen.

This year we have witnessed a radical change of heart. With the exception of PwC, keeping its powder dry on UK fee income until its anniversary next month, and Horwath Clark Whitehill, retaining its confidentiality due to concerns about comparability, practices are now far more forthcoming than in previous years.

Mid-tier refuseniks from last year – Grant Thornton and Robson Rhodes, to name but two – have now shown willing and provided overall figures, if not a full income breakdown by sector. This year, of the 25 firms under the Big Five, 16 gave a breakdown of income by sector.

So what’s caused this change of heart? Certainly the majority of the mid-tier firms themselves present a good level of growth and seem to have little to fear from disclosure. They report robust fee increases. Average mid-tier growth is 13% – 10% over inflation, in a year heralded as the beginning of a recession – and eight firms registered increases above and beyond that. In some cases, above-average increases are down to mergers or acquisitions. The Smith & Williamson Group, for instance, acquired Hereward Philips in March and accordingly jumps up a place to eleventh firm overall. The BDO Stoy Hayward and Moores Rowland marriage brings Stoys the accolade of biggest UK firm outside the Big Five on a fee income of £160.1m. Stoys leapfrogs Grant Thornton, last year’s top mid-tier firm, by a margin of £11.4m.

The firms themselves give several reasons for this new openness. Richard Emanuel, marketing director at Stoys, says voluntary disclosure of firms’ financial performance is absolutely essential to an open relationship with clients. ‘I think there is an increasing appetite among accountancy clients for this information. And I think that that’s entirely right,’ he says.

The progress towards limited liability partnerships may also have been in senior partners’ minds. Although the progress of the Bill looks to be temporarily stalled – it is unlikely to get a reading in this parliamentary session – its eventual advent may mean that a culture of greater openness is already being felt. Gareth Pearce, managing director at S&W, agrees: ‘I wouldn’t be at all surprised if that was an influence. Let’s just hope it continues. We’ve always felt that it’s much more sensible to be open.’

Changes year to year in a league table such as ours may appear slight – but in fact reflect upheaval for individual firms. Andersen Worldwide was positioned at number three last year. Out from under that umbrella, Arthur Andersen this year accordingly slips down to fifth place.

Stoys’ merger with Moores Rowland puts it ahead of Grant Thornton to confirm it as the biggest firm outside the Big Five. Pannell Kerr Forster suffered no ill effects from its aborted merger with Robson Rhodes and retains its place as eighth UK practice. Robson Rhodes, on the other hand, slipped from 13th to 15th place – overtaken by both Baker Tilly and Mazars Neville Russell.

So is the future for Group A through merger? Not everyone agrees; Michael Snyder, managing partner at Kingston Smith, for one. ‘It’s often a good idea in the mind of a senior managing partner,’ he suggests. ‘And there are economies of scale. But it is the culture and the focus on the client that’s important.’

Philip Hall, executive partner at Saffery Champness, says that Safferys is committed to growth through selective recruitment. He doesn’t see hitting the acquisition trail as a commercial necessity.

Stoys, on the other hand, believes that organic growth is unsustainable.

‘If you can’t put in the infrastructure, if you don’t have the critical mass to make the investment, how can growth be sustained longer term?’ asks Emanuel.

If there is a single lesson to be drawn from the 1999 Accountancy Age Top 50 league table, it is that there is safety in numbers. The Big Five firms have continued to grow, leaving many of the also-rans in their wake.

The sight of a league table makes it difficult to avoid football analogies, but the comparison is justified in the way accountancy firms are dividing into identifiable strata. The elite enjoy similar dominance and global recognition as Manchester United and Bayern Munich and are trailed by a second group of contenders for honours in the national league.

Below these firms are a number of Premier league strugglers who may have enjoyed glory in the past, but could now face relegation into the professional services equivalent of the Nationwide League.

Size does not guarantee quality, and many practitioners serving owner-managed businesses – and other niche markets – have done quite well by contrasting the tailored nature of their services to the faceless legions supplied apparently on tap by larger firms. But the unavoidable truth is that many of the key decision-makers for accountancy and related services – institutional investors, bankers and Big Five-trained finance directors and audit committee members – habitually use fee turnover as a selection criterion.

Any accountant who tries to tell you otherwise is talking through his or her hat.

 THE ACCOUNTANCY AGE TOP 50 LEAGUE TABLE
 OVERALL FIGURES
      Firm                     Fee income     Year end   % growth  Partners
                                       £m
 1    Pricewaterhouse Coopers1    1589.14     30.06.99       20.0      1200
 2    KPMG                         867.00     30.09.98       19.0       587
 3    Ernst & Young                633.00     26.06.98       19.0       434
 4    Deloitte & Touche            563.20     30.09.98       27.3       330
 5    Arthur Andersen2             465.00     31.12.98       19.2       405
 6    BDO Stoy Hayward             160.10     31.03.99       31.2       313
 7    Grant Thornton               148.70     30.06.99       12.5       236
 8    Pannell Kerr Forster3         74.40     30.04.98        2.3       126
 9    HLB Kidsons                   67.60     30.04.99        8.5       141
 10   Horwath Clark Whitehill4      63.56     30.03.98        n/k       228
 11   The Smith & Williamson
      Group5                        54.30     30.04.99       20.0        89
 12   Moore Stephens                53.60     31.12.98        7.6       147
 13   Mazars Neville Russell6       51.30     31.08.99       11.5        83
 14   Baker Tilly7                  49.20     31.03.99       20.3        97
 15   Robson Rhodes                 45.00     30.04.99        4.6        59
 16   BKR Haines Watts              32.60     31.03.99       16.4        58
 17   Saffery Champness             25.64     31.03.99       12.7        50
 18   MacIntyre Hudson8             21.20     31.03.99       25.0        45
 19   Chantrey Vellacott DFK9       20.10     30.04.99       12.3        39
 20   Kingston Smith                19.11     30.04.99       14.7        37
 21   Levy Gee10                    19.00     06.04.99       13.0        38
 22   Hacker Young                  15.44     30.04.99        6.0        48
 23   Bentley Jennison              14.76     31.05.99       28.4        40
 24   Solomon Hare                  14.00     31.03.99        2.0        25
 25   Fraser Russell                12.20     31.03.99        5.8        35
 26   BKL Weeks Green               10.09     30.04.99       55.1        24
 27   Cooper Lancaster Brewers       9.19     31.03.99       10.0        25
 28   Reeves & Neylan                8.70     31.03.99      (7.3)        26
 29   Menzies                        8.65     31.03.99        8.4        20
 30   Morison Stoneham               8.30     30.04.99        8.3        17
 31   Scott Oswald                   8.20     30.06.98       10.0        21
 32   Wilkins Kennedy                8.02     30.04.99       17.9        17
 33   Francis Clark                  7.88     30.04.99       12.5        22
 34   Morley & Scott                 7.80     30.09.98        8.3        19
 35   W D Johnston & Carmichael      7.30     31.05.99        8.0        18
 36   Morgan Brown & Spofforth       7.15     30.04.99       13.5        15
 37   Larking Gowen                  7.00     31.03.99        6.7        16
 38   Buzzacott                      6.95     30.09.98       14.5        17
 39   Rothman Pantall & Co           6.92     31.07.98       15.0        25
 40   Hays Allan                     6.53     30.04.99       15.6        15
 41   Brebner Allen Trapp            5.82     05.04.99        7.4        16
 42   Price Bailey                   5.80     31.03.99        5.0        20
 43   MacIntyre & Co                 5.50     31.03.99       13.4        13
 44   James & Cowper                 5.40     30.04.99        7.4        18
 45   Critchleys                     5.20     31.05.99        6.0        18
 46   Forrester Boyd                 5.06     31.03.99        7.4        16
 47   Jacksons                       5.00     31.05.99       32.0        30
 48   Spofforths                     4.88     01.06.99       10.5        20
 49   Mitchell Charlesworth          4.30     30.04.99        7.5        13
 50   Burnett Swayne                 4.10     31.12.98        5.0         8
 
 
 OVERALL FIGURES
      Firm                           Fees per   Professional       Fees per
                                      partner          staff   professional
                                                                      staff
 1    Pricewaterhouse Coopers1      1,320,000         19,200         82,786
 2    KPMG                          1,477,000                         7,038
 3    Ernst & Young                 1,458,000          5,619        112,600
 4    Deloitte & Touche             1,707,000          5,405         98,201
 5    Arthur Andersen2              1,150,000          5,789         80,324
 6    BDO Stoy Hayward                511,501
 7    Grant Thornton                  630,000          1,761         84,500
 8    Pannell Kerr Forster3           590,500          1,097         67,800
 9    HLB Kidsons                     480,000            854         79,000
 10   Horwath Clark Whitehill4        278,772
 11   The Smith & Williamson
      Group5                          610,112            409        109,036
 12   Moore Stephens                  364,626            774         58,198
 13   Mazars Neville Russell6         618,000            583         88,000
 14   Baker Tilly7                    505,000            455         89,000
 15   Robson Rhodes                   765,000            475         95,000
 16   BKR Haines Watts                562,000            351         79,000
 17   Saffery Champness               512,800            230        111,478
 18   MacIntyre Hudson8               471,000            297         71,380
 19   Chantrey Vellacott DFK9         516,000            214         79,000
 20   Kingston Smith                  516,000            186        102,742
 21   Levy Gee10                      500,000            170        112,000
 22   Hacker Young                    321,694            214         72,156
 23   Bentley Jennison                370,000            289         51,000
 24   Solomon Hare                    559,000            184         76,000
 25   Fraser Russell                  347,000            180         68,000
 26   BKL Weeks Green                 420,337            148         68,162
 27   Cooper Lancaster Brewers        367,000            124         74,000
 28   Reeves & Neylan                 335,000            164         53,000
 29   Menzies                         432,000             97         89,000
 30   Morison Stoneham                490,000             91         77,000
 31   Scott Oswald                    390,000            154         53,000
 32   Wilkins Kennedy                 472,000            108         74,000
 33   Francis Clark                   358,000            163         43,000
 34   Morley & Scott                  411,000            129         61,000
 35   W D Johnston & Carmichael       406,000             48        152,000
 36   Morgan Brown & Spofforth        476,000             90         79,000
 37   Larking Gowen                   438,000            172         40,700
 38   Buzzacott                       409,000             60        116,000
 39   Rothman Pantall & Co            276,800            104         66,600
 40   Hays Allan                      433,000             70         93,285
 41   Brebner Allen Trapp             363,560             54        107,720
 42   Price Bailey                    290,000             91         63,700
 43   MacIntyre & Co                  423,000             59         93,000
 44   James & Cowper                  301,000             84         65,000
 45   Critchleys                      289,000             98         53,000
 46   Forrester Boyd                  316,000            103         49,000
 47   Jacksons                        167,000             80         62,500
 48   Spofforths                      244,000             70         70,000
 49   Mitchell Charlesworth           331,000             86         50,000
 50   Burnett Swayne                  512,000             80         50,000
 
 
 OVERALL FIGURES                                     BREAKDOWN
      Firm                  Number of      Audit/        %     Tax        %
                           UK offices  accounting   change      £m   change
                                               £m
 
 1    Pricewaterhouse Coopers1
 2    KPMG                         30      382.00      8.0  187.00     21.0
 3    Ernst & Young                24      199.70     10.0  184.10     15.0
 4    Deloitte & Touche            24      165.20     10.8  126.20     15.7
 5    Arthur Andersen2             15
 6    BDO Stoy Hayward             45
 7    Grant Thornton               42       50.40     11.0   45.70     14.2
 8    Pannell Kerr Forster3        28
 9    HLB Kidsons                  28       28.00      1.0   19.50     25.0
 10   Horwath Clark Whitehill4     69
 11   The Smith & Williamson
      Group5                        8        9.60     45.0   13.10     32.0
 12   Moore Stephens               24       23.40            11.70
 13   Mazars Neville Russell6      19       25.00            10.70
 14   Baker Tilly7                 11       29.60     13.8   14.20     23.4
 15   Robson Rhodes                10
 16   BKR Haines Watts             31
 17   Saffery Champness            10        8.69             6.30
 18   MacIntyre Hudson8            11        7.90     23.0    5.00     32.0
 19   Chantrey Vellacott DFK9       8        8.40             7.50
 20   Kingston Smith                6       11.50     12.4    2.08      9.5
 21   Levy Gee10                    5       12.00     15.0
 22   Hacker Young                  6
 23   Bentley Jennison             11
 24   Solomon Hare                  8        3.80      5.4    2.20    (0.8)
 25   Fraser Russell                5        9.00             1.80
 26   BKL Weeks Green               4
 27   Cooper Lancaster Brewers      6        5.14      2.0    2.54     28.0
 28   Reeves & Neylan              11        4.10             2.60
 29   Menzies                       6
 30   Morison Stoneham              4        3.30      9.0    2.10      5.0
 31   Scott Oswald                  8        5.60      7.0    0.60      3.0
 32   Wilkins Kennedy               5        5.02     15.4    1.60     17.6
 33   Francis Clark                 6        3.69      4.8    2.09    (0.9)
 34   Morley & Scott                5        3.50      3.0    1.20      9.0
 35   W D Johnston & Carmichael     9        4.90      3.0    0.90     20.0
 36   Morgan Brown & Spofforth      3        3.40      6.3    1.45     11.5
 37   Larking Gowen                 7        4.90      5.6    1.10     21.9
 38   Buzzacott                     1        3.97     22.3    1.99      0.7
 39   Rothman Pantall & Co         14
 40   Hays Allan                    1
 41   Brebner Allen Trapp           2        3.60      4.0    1.50     11.0
 42   Price Bailey                  8        4.61             0.90
 43   MacIntyre & Co                1        3.30      8.0    1.20      8.0
 44   James & Cowper                4        3.50      6.0    1.40     12.0
 45   Critchleys                    6        2.90      6.0    1.30      2.0
 46   Forrester Boyd                4
 47   Jacksons                     14        2.02     24.0    0.75     24.0
 48   Spofforths                    5        2.83             1.23
 49   Mitchell Charlesworth         5        2.50      2.0    0.60     20.0
 50   Burnett Swayne                1        2.60      4.0    0.50     11.0
 
 
 Notes: 1. PwC did not provide figures. Our fee income entry is an estimate
 based on the firm's reported global growth of 19.9%; 2. Arthur Andersen
 figures include fee income and partners for Dundas, Wilson & Garretts; 3.
 PKF results include figures from the merged Hacker Young Bristol office;
 4. Horwath Clark Whitehill provided no figures this year; 5. Smith &
 Williamson's figures include the fee income of Hereward Philips for the
 year to 31 March 1999. The acquisition accounts for 9% of S&W's growth; 6.
 Mazars Neville Russell includes fee income from Mazars & Guerard UK
 (£2.5m); 7. Baker Tilly fee income includes a full year of turnover for
 the merged London practice of Casson Beckman.
 Corporate finance and consultancy fees are included in accounting and
 audit fee income; 8. MacIntyre Hudson results include £3.2m from the
 purchase of Hughes Allen; 9. Chantrey Vellacott DFK fee income includes
 £700 000 from Witcher & Sharp; 10. Levy Gee fee income for audit includes
 figures for tax work.

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