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Accounting and Financial Management - UK - February 2017

“Consultancy will continue to represent the strongest growth potential for accountancy firms, with digital technology and data analytics expected to become an even bigger part of the consulting market. While Brexit-induced uncertainty is likely to negatively impact the market, it will also present opportunities for accountants to provide advisory services and guidance to clients in these uncertain times. ”
– Claudia Preedy – B2B Analyst

This Report answers the following key questions:

  • What are the implications of Brexit on the UK accountancy sector?
  • What are the likely implications of HMRC’s plans for “Making Tax Digital” for accountants?
  • How are the recently introduced audit reforms affecting mid-tier accounting firms?
  • How can big data analytics help drive growth for accountants?

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Table of contents

  1. Executive Summary

      • The market
        • Figure 1: Segmentation of the UK market for accounting & financial management, by type of service, 2012-16
        • Figure 2: Forecast UK market for accounting & financial management, 2017-21
        • Figure 3: Forecast segmentation of the UK market for accounting & financial management, by type of service, 2017 and 2021
      • Market factors
          • Figure 4: Number of private sector businesses in the UK, 2002-16
        • Companies
          • What we think
          • Key Insights

              • What are the implications of Brexit on the UK accountancy sector?
                • What are the likely implications of HMRC’s plans for “Making Tax Digital” for accountants?
                  • How are the recently introduced audit reforms affecting mid-tier accounting firms?
                    • How can big data analytics help drive growth for accountants?
                    • Introduction

                        • Definitions
                          • Methodology
                            • Abbreviations
                              • Market positioning
                                • UK economy
                                  • Overview
                                    • Figure 5: UK GDP quarterly development, 2003-16
                                    • Figure 6: UK GDP in economic downturns and recoveries since 1979
                                  • Inflation
                                    • Interest rates
                                      • House prices
                                        • Figure 7: UK House price changes, 2004-2016
                                      • Consumer spending
                                        • Manufacturing
                                          • Figure 8: UK manufacturing, 2014-16
                                        • Business investment
                                          • Figure 9: UK GFCF 2003-16
                                        • Imports
                                          • Exports
                                          • Market Factors

                                            • Key points
                                              • Legislation and government policy
                                                • CMA audit order and new EU regulatory framework on statutory audit
                                                  • Impact of Brexit on EU audit reform
                                                    • New audit threshold
                                                      • New UK accounting standards
                                                        • Large accounting firms under spotlight in clampdown on tax avoidance schemes
                                                          • Measures put in place to crack down on tax avoidance
                                                            • Finance Bill 2017
                                                              • Companies Act shake-up
                                                                • Scottish tax devolution
                                                                  • HMRC move towards digital tax services
                                                                    • Other market factors
                                                                      • Rise in number of active businesses as UK economic recovery becomes more robust
                                                                        • Figure 10: Number of private sector businesses in the UK, 2002-16
                                                                        • Figure 11: Number of private sector businesses in the UK, 2002-16
                                                                        • Figure 12: Number of VAT and/or PAYE registered enterprises in the UK, by industry group and turnover size band, 2016
                                                                      • Self-employment higher than at any point over the past 40 years
                                                                        • Figure 13: Self-employed workers in the UK, 2005-16
                                                                      • Trends in insolvencies and business recovery
                                                                        • Figure 14: Number of company insolvencies, receiverships and administrations in England & Wales, 2006-16
                                                                      • Corporate credit conditions
                                                                        • UK M&A market remains resilient in 2016, with a weaker sterling attracting foreign investment
                                                                          • Brexit-induced uncertainty to potentially result in slump in M&A activity
                                                                            • Figure 15: Mergers and acquisitions involving UK companies, 2004-16
                                                                          • Number of listed companies on a downward trend
                                                                            • Figure 16: Number of main market and AIM listed companies, 2009-16
                                                                            • Figure 17: Number of main market and AIM listed companies, 2009-16
                                                                        • Market Size and Segmentation

                                                                          • Key points
                                                                            • Overview
                                                                              • Consultancy sector shows strongest growth as accountancy firms expand their service offering
                                                                                • Accountancy firms adopt new business models to diversify or specialise
                                                                                  • Figure 18: The UK market for accounting & financial management, 2012-16
                                                                                  • Figure 19: The UK market for accounting & financial management, 2011-15
                                                                                • Market segmentation
                                                                                  • Overview
                                                                                    • KPMG is top listed company auditor, PwC is top FTSE 100 auditor
                                                                                        • Figure 20: Segmentation of the UK market for accounting & financial management, by type of service, 2012-16
                                                                                        • Figure 21: Segmentation of the UK market for accounting & financial management, by type of service, 2012 and 2016
                                                                                      • Audit & accounting
                                                                                        • Rise in audit threshold putting pressure on lower end of auditing market
                                                                                          • Audit fees at lower end of the market remain squeezed but fees are more stable at the top end
                                                                                            • Innovative technology solutions enable auditors to deliver continually higher audit quality and deeper insight
                                                                                              • Figure 22: UK fee income from audit & accounting services, 2012-16
                                                                                            • Tax services
                                                                                              • Demand for tax advisory services remains high
                                                                                                • Implications of Making Tax Digital for accountants
                                                                                                    • Figure 23: UK fee income from tax services, 2012-16
                                                                                                  • Consultancy
                                                                                                    • Accounting firms face increased competition in consultancy services sector
                                                                                                      • Brexit-induced uncertainty sees boom in demand for consultancy services
                                                                                                          • Figure 24: UK fee income from consultancy services, 2012-16
                                                                                                          • Figure 25: UK fee income from consultancy services, 2012-16
                                                                                                        • Corporate Finance & Business Recovery
                                                                                                          • Insolvency practitioners struggle with a more robust economic recovery
                                                                                                            • Brexit could challenge UK’s leading position in cross-border restructuring
                                                                                                                • Figure 26: UK fee income from corporate finance & business recovery services, 2012-16
                                                                                                              • Overseas trade in accountancy services
                                                                                                                  • Figure 27: International trade in accountancy services, 2011-15
                                                                                                                  • Figure 28: Exports and imports of accountancy services, 2011-15
                                                                                                              • Market Trends & Issues

                                                                                                                • Key points
                                                                                                                  • FTSE 250 audit market to remain preserve of the big four for the foreseeable future
                                                                                                                    • Lower end of the audit market is becoming increasingly uneconomical for auditors
                                                                                                                      • Accounting firms on acquisition trail to beef up consultancy arms
                                                                                                                        • Increased demand for cyber security advisory services
                                                                                                                          • Regulatory and risk consultancy services show strong demand growth
                                                                                                                            • Buoyant M&A activity as accountancy firms look to rapidly expand consultancy capabilities
                                                                                                                              • Big four tap into start-up and SME market
                                                                                                                                • Cloud computing is transforming the accounting industry
                                                                                                                                  • ‘Big Data’ and data analytics represent key growth areas for accountants
                                                                                                                                    • Role of content marketing and social media
                                                                                                                                      • Forensic accounting
                                                                                                                                      • Industry Structure

                                                                                                                                        • Key points
                                                                                                                                          • Industry development
                                                                                                                                              • Figure 29: Top 20 accounting firms in the UK, by fee income, 2016
                                                                                                                                            • Accounting firms are moving into legal services
                                                                                                                                              • Mid-tier firms are also on consolidation course
                                                                                                                                                  • Figure 30: Analysis of the changes in the structure of the UK accounting, bookkeeping, auditing and tax consultancy industry, 2012-16
                                                                                                                                                • Structure by employment
                                                                                                                                                  • Figure 31: Analysis of the employment structure of the accounting, bookkeeping, auditing and tax consultancy industry, 2015 and 2016
                                                                                                                                                • Structure by turnover
                                                                                                                                                  • Figure 32: Analysis of the financial structure of the UK accounting, bookkeeping, auditing and tax consultancy industry, 2015 and 2016
                                                                                                                                                  • Figure 33: Analysis of the financial structure of the UK accounting, bookkeeping, auditing and tax consultancy industry, 2016
                                                                                                                                              • Company Profiles

                                                                                                                                                • RSM UK Holdings Ltd (Formerly Baker Tilly UK Holdings LTD)

                                                                                                                                                      • Figure 34: Segmental turnover analysis of RSM UK Holdings, 2016
                                                                                                                                                      • Figure 35: Financial analysis of RSM UK Holdings, 2012-16
                                                                                                                                                    • Company strategy
                                                                                                                                                    • BDO LLP

                                                                                                                                                          • Figure 36: Financial analysis of BDO, 2012-16
                                                                                                                                                        • Company strategy
                                                                                                                                                        • Deloitte LLP

                                                                                                                                                              • Figure 37: Segmental turnover analysis of Deloitte, 2015
                                                                                                                                                              • Figure 38: Financial analysis of Deloitte, 2011-15
                                                                                                                                                            • Company strategy
                                                                                                                                                            • Ernst & Young LLP

                                                                                                                                                                  • Figure 39: Segmental turnover analysis of EY, 2016
                                                                                                                                                                  • Figure 40: Financial analysis of Ernst & Young, 2012-16
                                                                                                                                                                • Company review and strategy
                                                                                                                                                                • Grant Thornton UK LLP

                                                                                                                                                                      • Figure 41: Segmental turnover analysis of Grant Thornton, 2016
                                                                                                                                                                      • Figure 42: Financial analysis of Grant Thornton UK, 2012-16
                                                                                                                                                                    • Company strategy
                                                                                                                                                                      • Company outlook
                                                                                                                                                                      • KPMG LLP

                                                                                                                                                                            • Figure 43: Segmental revenue analysis of KPMG, 2016
                                                                                                                                                                            • Figure 44: Financial analysis of KPMG, 2012-16
                                                                                                                                                                          • Company outlook
                                                                                                                                                                          • Mazars LLP

                                                                                                                                                                                • Figure 45: Segmental turnover analysis of Mazars, 2015
                                                                                                                                                                                • Figure 46: Financial analysis of Mazars, 2011-15
                                                                                                                                                                              • Company strategy & outlook
                                                                                                                                                                              • Moore Stephens LLP

                                                                                                                                                                                    • Figure 47: Segmental turnover analysis of Moore Stephens, 2016
                                                                                                                                                                                    • Figure 48: Financial analysis of Moore Stephens, 2012-16
                                                                                                                                                                                  • Company strategy
                                                                                                                                                                                  • PricewaterhouseCoopers LLP

                                                                                                                                                                                        • Figure 49: Segmental turnover analysis of PwC, 2016
                                                                                                                                                                                        • Figure 50: Financial analysis of PwC, 2012-16
                                                                                                                                                                                      • Company review & strategy
                                                                                                                                                                                      • Smith and Williamson Holdings Ltd

                                                                                                                                                                                            • Figure 51: Financial analysis of Smith & Williamson Holdings, 2012-16
                                                                                                                                                                                          • Company outlook & strategy
                                                                                                                                                                                          • Market Forecast

                                                                                                                                                                                            • Key points
                                                                                                                                                                                              • Market prospects
                                                                                                                                                                                                • UK economic outlook remains positive but Brexit-related challenges ahead
                                                                                                                                                                                                  • Acquisitions, partnerships and alliances to continue to revolve around the technology space
                                                                                                                                                                                                    • Figure 52: Forecast UK market for accounting & financial management, 2017-21
                                                                                                                                                                                                    • Figure 53: Forecast UK market segmentation for accountancy & financial management, by type of service, 2017-21
                                                                                                                                                                                                  • Audit and accounting
                                                                                                                                                                                                    • Tax services
                                                                                                                                                                                                      • Consultancy
                                                                                                                                                                                                        • Corporate finance and business recovery
                                                                                                                                                                                                          • Figure 54: Forecast UK market segmentation for accounting & financial management, by type of service, 2017-21
                                                                                                                                                                                                      • Further Sources & Contacts

                                                                                                                                                                                                        • Trade associations
                                                                                                                                                                                                          • Association of Chartered Certified Accountants (ACCA UK)
                                                                                                                                                                                                            • Chartered Institute of Management Accountants (CIMA UK)
                                                                                                                                                                                                              • Chartered Institute of Public Finance Accountancy (CIPFA)
                                                                                                                                                                                                                • Institute of Chartered Accountants in England and Wales (ICAEW)
                                                                                                                                                                                                                  • Institute of Chartered Accountants Scotland (ICAS)
                                                                                                                                                                                                                    • Trade exhibitions
                                                                                                                                                                                                                      • Accountex 2017
                                                                                                                                                                                                                        • CIPFA annual conference 2017
                                                                                                                                                                                                                          • Trade magazines
                                                                                                                                                                                                                            • Accountancy Age
                                                                                                                                                                                                                              • Accountancy Live
                                                                                                                                                                                                                                • Tax Advisor
                                                                                                                                                                                                                                  • Taxation
                                                                                                                                                                                                                                    • The Accountant

                                                                                                                                                                                                                                    Companies Covered

                                                                                                                                                                                                                                    To learn more about the companies covered in this report please contact us.

                                                                                                                                                                                                                                    Accounting and Financial Management - UK - February 2017

                                                                                                                                                                                                                                    US $1,282.26 (Excl.Tax)