And both service lines continue to provide the bread-and-butter income for almost all firms. In most cases, the two added together account for more than half of total income, and in many cases a lot more.
As Baker Tilly’s national managing partner Laurence Longe puts it: ‘Audit and tax are the bedrock of the profession. They continue to be the fundamental twin pillars.’
On the audit and accounting side, most firms enjoyed fee income growth of between 5% and 20%, and only two – Littlejohn Frazer and Buzzacott – recorded a decline.
According to Longe, the level of competition in the mature audit market has remained more or less the same over the last few years. Pricing, he says, remains a factor, but not usually the driving factor.
‘Most businesses realise that the cheapest won’t necessarily be the best,’ he says.
However, BDO Stoy Hayward managing partner Simon Bevan predicts increasing price competition in the audit market as fears of economic slowdown grow.
Both he and Longe emphasise the inclusion of advisory services in their audit and accounting figures, as many lump their audit and business advisory services in one department.
Many firms are trying to develop these services, which could include anything from management structure reviews to helping companies make sure they are getting the best value for money from their telecom spend.
Changing the audit limit
The audit market for smaller firms could be hit if and when the UK raises the audit threshold to over Pounds 4m, but the government has yet to elaborate on its rather vague commitment to do this sometime soon.
Mid-tier and larger firms, meanwhile, face the challenge of getting used to international accounting standards ahead of the European Union’s deadline for their implentation for listed companies in 2005.
When it comes to tax, it seems that Gordon Brown’s incessant tinkering with the tax system has played a leading role in bolstering income for accountancy firms.
The market for tax services is healthy, with most firms revealing growth in the sector of at least 10%, and in some cases approaching 50%.
And here once again, only two firms – Littlejohn Frazer and Price Bailey – recorded an actual decline in income.
Bevan says particular areas of growth are capital gains tax business planning, and share option schemes.
Reforms and changes in both areas have provided new opportunities for businesses, and led to extra complexities, both factors driving businesses to call in professional advisers.
He points out that advising on share schemes dovetails neatly with human resources advice, which more firms are starting to provide.
However, the war for talented tax professionals continues, which is a factor holding back tax fee growth across the market.
The prospects for tax work look good, however, as more people are attracted into it by the intellectual challenge and high salaries.
And despite occasional rhetoric about reducing red tape for business, the chancellor’s passion for tax changes looks unquenched.
Five more years of a Labour government is likely to mean five more lucrative years for the tax departments of accountancy firms.
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