‘LOWBALLING’ is continuing to undermine the work of firms up and down the UK, according to accountancy market analysts.
The practice – whereby firms or practitioners underprice a service in order to win clients – is frowned upon but persists in some quarters of the market.
“The problem goes right down the food-chain,” said FoulgerUnderwoodKATO senior consultant Phil Shohet (pictured). “Some people are being quite cynical about trying to get the work at an uneconomic price and lifting those fees. It’s quite prolific.”
Last year, top ten firm Baker Tilly claimed that lowballing pricing competition was one of the factors behind its £8.6m reduction on pre-tax profits.
One of the dangers is the decline in quality clients receive from lowballers as they take on more customers in order to compensate for the low price they charge, Shohet said.
“What frequently happens is they think they can go in low and the intention is to sell more services and to jack up that same price for the work they’re going in low on,” he told Accountancy Age. “Often the clients are quite shrewd – especially propietorially-owned businesses – and say ‘we’re not going to give you that work’ and ask to fix the price for the next four or five years. So suddenly firms are left with this uneconomic job for many years.”
The news comes as FoulgerUnderwoodKATO is to launch a study into the practice and a wide variety of other areas of the accountancy market including how well equipped firms are for the future, coping with competition and sourcing and retaining talent.
“What we’re looking at is how equipped firms are for the next five years in terms of their own businesses and actually supplying the right services for the right price to clients,” said Shohet. “Recruitment is a big problem, and as is retention. There’s often a glass ceiling and managers can’t necessarily trade above that and they may not get partnership, so they often move on, while other firms struggle with the low density of population in their area, and that poses a real challenge.”
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