That’s the conclusion based on our estimated results for Andersen. In a world without the Enron debacle, Andersen would probably have reached a £680.8m fee income for the year ending in August 2001. That is based on its result in last year’s Accountancy Age Top 50 plus the firm’s global growth rate of 10% for that period.
Deloitte, meanwhile, in the year to 31 May 2001 pulled off a 19.3% rise in fee income, bringing it to £822m – giving it a combined fee income with Andersen of £1,502.8m, and putting it comfortably ahead of KPMG, this year’s number three firm, which itself reported a robust 18% growth to £1,372.6m.
That £130.2m gap between Deloitte and KPMG tells some interesting tales already, however. It is the result of simple adding together of one reported income total to another estimated one and it does not take into account the insolvency fee income – perhaps as much as £50m – that went Ernst & Young’s way.
As time goes on, we expect to hear of Andersen teams making their homes in other firms, particularly in regional centres. And in a world where a big firm partner can command the fat end of £2m in fees – more if you’re at PwC – such moves can count for a lot.
So that margin may well overstate the case. But if 1 July brings a successful joining of Deloitte and Andersen business, we can expect interesting things – smaller gaps between the four top firms and a still-more competitive environment at the top of the league.
We are perhaps treading a fine line here: historical results combined with an estimate based on a deal that has yet to be finalised. But the Accountancy Age Top 50 is not just about bringing together reams of historical data, however useful such a reference tool may prove. It is essentially a forward-looking exercise. We look at the trends of the last year and take on board what we understand about what is happening to the profession as whole.
Hence our aggregation of Andersen and Deloitte’s results. Hence also our new table of players just outside the Top 50. In a world where even big firms can conceivably disappear, and with the hunger of consolidators Numerica and Tenon apparently unabated, these are tomorrow’s top firms too.
So what else is news? Immediately outside the Big Four, Grant Thornton is now ahead of BDO Stoy Hayward and Baker Tilly has now leapfrogged PKF.
Stoys’ UK fee income stays static at £201.5m – its like-for-like fee growth of 16.7% offset by the loss of its East Midlands practice to Tenon.
At 7.5%, Grant Thornton’s rise in fees this time around was weaker than last year’s 16.2%, but it gave the firm £204.5m and proved enough to overtake Stoys’ position as first outside the top four firms.
Baker Tilly’s merger with HLB Kidsons gave the firm a strong £158.5m income. The merged firm’s restated comparatives resulted in a like-for-like growth rate of 6%.
Tenon, meanwhile, is now a top ten player – its stated aim just two years ago.
At the same time, Moore Stephens has overtaken Smith & Williamson by a small margin. Horwath Clark Whitehill has ostensibly fallen from tenth position to number 14. This is because the firm’s ambition to reposition itself as a single national brand has led to a restatement of its figures, excluding associate firms – those that won’t be adopting the Horwath brand.
Chief executive David Furst explains: ‘A number of our associated firms are following alternative strategies (to our own), which are more appropriate to their own needs and environment. We continue to work as closely as ever with these firms, but have excluded them from our figures to give a fairer picture of ourselves.’ In an environment of consolidation, there is less and less room for loose networks of firms and Horwath has opted for clarity.
Kingston Smith has overtaken Chantrey Vellacott DFK, partly as a result of the firm’s acquisition of Mazars Neville Russell’s Ilford office.
One interesting thought for fact fans: last year the combined income of the Accountancy Age Top 50 reached £6.7bn.
The last few months have proved to be hard ones for all sectors. This year’s Top 50, minus the £680.8m we’ve attributed to Andersen is also worth £6.7bn. Even if Andersen’s business and income had disappeared into some imaginary fiscal black hole, the Top 50 is as strong today as it was last year.
Assuming business is worth as much broken up as it is in one place, the Top 50 has grown by just over 10% to £7.4bn. Not bad in times like these.
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