Happy ending, bright outlook

But for most, the numbers being crunched this time around will be a lot more
comforting than others witnessed in recent years.

As Accountancy Age reported last month, the Big Four are – mostly –
seeing a return to double-digit growth in fee income. And that’s good news for
all of us. If smaller firms with SME clients return to growth it takes a while
to reach the firms at the top who are dealing with multinationals. However,
trends that start at the top have a habit of trickling down the Top 50.

And don’t forget firms are only making more money because their clients are.

After a good July most of the big firms yet to report are expecting to show
the sort of increases that have not been sighted for several years. Deloitte may
have reported growth of ‘only’ 8.8% last month, but that won’t bother their
partners unduly.

At this stage of the cycle – when business is on the up – the firm that
reports first usually reports least. But, measured by fees per partner, Deloitte
looks like one of the best-run firms around.

But it is those to that are yet to be reported that are likely to really
catch the eye. PricewaterhouseCoopers and Ernst & Young are both expecting
to report growth in the region of 10 to 15% later this year, while at KPMG, the
picture looks rosier still – a 15 to 20% increase appears likely over at
Salisbury Square.

Each firm breaks down its fee income differently, but it’s clear that it’s
advisory work that is driving up earnings. This consultancy work is not the sort
of consultancy work that firms engaged themselves in with gusto before the turn
of the millennium.

So no systems development but plenty of finance-centric advice work – Sarbox
and IFRS, compliance programme assurance, post-merger integration and the like.

But can it continue? Well, yes, seems to be the consensus. But only for the
time being. Most firms (and many of the institutes, for that matter, which are
planning their student intake) are assuming a decent 2006 and then a slowdown.
As for how sharp that downturn will be – and exactly where it will bite – it’s
still too early to call.

So happy budgeting over the next few weeks. And as arduous as it feels,
remember next year is likely to be a whole lot less fun.

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