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Accounting and Financial Management - UK - February 2018

“Many recent acquisitions by major accountancy firms have revolved around the technology space, such as big data, analytics and digitisation, which is playing an increasingly important role in consultancy services. This trend is set to continue, with larger firms looking to strengthen their multi-disciplinary skills and advisory practices through medium‑sized or boutique bolt‑on acquisitions. Cyber security and risk consultancy companies also remain popular acquisition targets for accountancy firms.

Larger firms are also increasingly forming strategic alliances with technology and software companies to be at the forefront of technology innovation. Greater use of automation, cloud computing, big data analytics, digital platforms and increasingly AI, are set to remain key focuses of investment in the accounting industry for the foreseeable future.”

- Claudia Preedy - B2B Analyst

This report addresses the following key questions concerning the UK accounting and financial management market:

  • How has the UK accounting and financial management market performed over the last five years?
  • How are technological advancements impacting the sector?
  • What are the major trends and issues affecting the market?
  • How have key players performed in recent years?
  • How is the market expected to develop over the next five years?

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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, 201317
        • Figure 2: Forecast UK market for accounting & financial management, 201822
        • Figure 3: Forecast segmentation of the UK market for accounting & financial management, by type of service, 2018 and 2022
      • Market factors
          • Figure 4: Number of private sector businesses in the UK, 200317
        • 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 is new technology, such as artificial intelligence, impacting the audit sector?
                    • Introduction

                        • Definitions
                          • Methodology
                            • Abbreviations
                              • Market Positioning
                                • UK economy
                                  • Overview
                                    • Figure 5: Forecast GDP development 2017-23
                                    • Figure 6: UK GDP quarterly development, 2004-17
                                  • Inflation
                                    • Interest rates
                                      • House prices
                                        • Figure 7: UK House price changes, 2006-2017
                                      • Consumer spending
                                        • Manufacturing
                                          • Figure 8: UK manufacturing, 2014-17
                                        • Business investment
                                          • Figure 9: UK GFCF, chained volume measures, seasonally adjusted, 2004-17
                                        • 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 2017-18
                                                              • Companies Act shake-up
                                                                • Scottish tax devolution
                                                                  • HMRC move towards digital tax services
                                                                    • Other Market Factors
                                                                      • Number of active businesses in the UK
                                                                        • Figure 10: Number of private sector businesses in the UK, 2003-17
                                                                        • Figure 11: Number of private sector businesses in the UK, 2003-17
                                                                        • Figure 12: Number of VAT and/or PAYE registered enterprises in the UK, by industry group and turnover size band, 2017
                                                                      • Rapid rise in self-employment since 2008
                                                                        • Figure 13: Self-employed workers in the UK, 2006-17
                                                                      • Trends in insolvencies and business recovery
                                                                          • Figure 14: Number of company insolvencies, receiverships and administrations in England & Wales, 2007-17
                                                                        • Corporate credit conditions
                                                                          • UK M&A market remains resilient in 2017, despite uncertain economic and political backdrop
                                                                            • Figure 15: Mergers and acquisitions involving UK companies, 2005-17
                                                                          • Number of listed companies on a downward trend
                                                                            • Figure 16: Number of main market and AIM listed companies, 2009-17
                                                                            • Figure 17: Number of main market and AIM listed companies, 200917
                                                                        • Market Size and Segmentation

                                                                          • Key points
                                                                            • Overview
                                                                              • Consultancy sector is key driver for market 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, 2013-17
                                                                                    • Figure 19: The UK market for accounting & financial management, 2013-17
                                                                                  • 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, 201317
                                                                                        • Figure 21: Segmentation of the UK market for accounting & financial management, by type of service, 2013 and 2017
                                                                                      • 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 as competition focusses on quality of audits
                                                                                            • Innovative technology solutions enable auditors to deliver continually higher audit quality and deeper insight
                                                                                              • Figure 22: UK fee income from audit & accounting services, 2013-17
                                                                                            • Tax services
                                                                                              • Government clampdown on tax avoidance schemes
                                                                                                • Panama and Paradise Papers leaks reveal global industry of tax avoidance packages in offshore tax havens
                                                                                                  • Regulatory changes and tighter tax rules stimulate demand for tax advice and compliance services
                                                                                                    • Implications of Making Tax Digital for accountants
                                                                                                        • Figure 23: UK fee income from tax services, 2013-17
                                                                                                      • Consultancy
                                                                                                        • Accountancy firms expand consultancy function and multi-disciplinary skills through strategic acquisitions
                                                                                                          • Technology, analytics and digital play increasingly important role in consultancy services
                                                                                                            • Accounting firms face increased competition in consultancy services sector
                                                                                                              • Brexit-induced uncertainty stimulates demand for consultancy services
                                                                                                                  • Figure 24: UK fee income from consultancy services, 2013-17
                                                                                                                  • Figure 25: UK fee income from consultancy services, 2013-17
                                                                                                                • Corporate Finance & Business Recovery
                                                                                                                  • Insolvency practitioners struggle with a more sustained economic recovery
                                                                                                                    • But more uncertain economic outlook could see more UK businesses fall into financial distress
                                                                                                                      • Brexit could challenge UK’s leading position in cross-border restructuring
                                                                                                                          • Figure 26: UK fee income from corporate finance & business recovery services, 2013-17
                                                                                                                        • Overseas trade in accountancy services
                                                                                                                            • Figure 27: International trade in accountancy services, 2012-16
                                                                                                                            • Figure 28: Exports and imports of accountancy services, 2012-16
                                                                                                                        • Market Trends & Issues

                                                                                                                          • Key points
                                                                                                                            • Market trends & issues
                                                                                                                              • FTSE 250 audit market to remain preserve of the ‘big four’ for the foreseeable future
                                                                                                                                • Adoption of new technologies to drive increased automation and improved quality of audits
                                                                                                                                  • Lower end of the audit market is becoming increasingly uneconomical for auditors
                                                                                                                                    • Accounting firms continue to strengthen their consultancy arms and multi-disciplinary skills
                                                                                                                                      • As digital technology represents a key driver for the consultancy services sector
                                                                                                                                        • Strong demand for cyber security advisory services, as ‘big four’ become the globe’s largest cyber security consulting firms
                                                                                                                                          • Regulatory and risk consultancy services continue to show strong demand growth
                                                                                                                                            • Buoyant M&A activity as accountancy firms look to rapidly expand consultancy capabilities
                                                                                                                                              • Accounting firms are moving into legal services
                                                                                                                                                • ‘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
                                                                                                                                                    • Industry Structure

                                                                                                                                                      • Key points
                                                                                                                                                        • Industry development
                                                                                                                                                            • Figure 29: Top 20 accounting firms in the UK, by fee income, 2017
                                                                                                                                                          • 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, 2013-17
                                                                                                                                                            • Structure by Employment
                                                                                                                                                              • Figure 31: Analysis of the employment structure of the accounting, bookkeeping, auditing and tax consultancy industry, 2016 and 2017
                                                                                                                                                            • Structure by Turnover
                                                                                                                                                              • Figure 32: Analysis of the financial structure of the UK accounting, bookkeeping, auditing and tax consultancy industry, 2016 and 2017
                                                                                                                                                              • Figure 33: Analysis of the financial structure of the UK accounting, bookkeeping, auditing and tax consultancy industry, 2017
                                                                                                                                                          • Company Profiles

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

                                                                                                                                                                  • Figure 34: Segmental turnover analysis of RSM UK Holdings, 2017
                                                                                                                                                                  • Figure 35: Financial Analysis of RSM UK Holdings, 2013-17
                                                                                                                                                                • Company strategy
                                                                                                                                                                • BDO LLP

                                                                                                                                                                    • Company performance
                                                                                                                                                                      • Figure 36: Financial Analysis of BDO, 2013-17
                                                                                                                                                                    • Company strategy:
                                                                                                                                                                    • Deloitte LLP

                                                                                                                                                                        • Deloitte combines nine European member firms effective from 1 June 2017
                                                                                                                                                                          • Recent acquisitional activity, investments and partnerships
                                                                                                                                                                            • Deloitte follows rivals into legal services market
                                                                                                                                                                              • Financial performance
                                                                                                                                                                                • Figure 37: Segmental turnover analysis of Deloitte, 2017
                                                                                                                                                                                • Figure 38: Turnover analysis of Deloitte, by industry, 2017
                                                                                                                                                                                • Figure 39: Financial Analysis of Deloitte, 2012-16
                                                                                                                                                                              • Company strategy
                                                                                                                                                                              • Ernst & Young LLP

                                                                                                                                                                                  • Financial year 2017 sees record investment in technology by EY
                                                                                                                                                                                    • Figure 40: Segmental turnover analysis of EY, 2017
                                                                                                                                                                                    • Figure 41: Financial Analysis of Ernst & Young, 2013-17
                                                                                                                                                                                  • Company review and strategy:
                                                                                                                                                                                  • Grant Thornton UK LLP

                                                                                                                                                                                      • Recent acquisitions and developments
                                                                                                                                                                                          • Figure 42: Segmental turnover analysis of Grant Thornton, 2016
                                                                                                                                                                                          • Figure 43: Financial Analysis of Grant Thornton UK, 2013-17
                                                                                                                                                                                        • Company strategy:
                                                                                                                                                                                          • Company performance and outlook:
                                                                                                                                                                                          • KPMG LLP

                                                                                                                                                                                                • Figure 44: Segmental revenue analysis of KPMG, 2017
                                                                                                                                                                                                • Figure 45: Financial Analysis of KPMG, 2013-17
                                                                                                                                                                                              • Company performance:
                                                                                                                                                                                              • Mazars LLP

                                                                                                                                                                                                    • Figure 46: Segmental turnover analysis of Mazars, 2016
                                                                                                                                                                                                    • Figure 47: Financial Analysis of Mazars, 2012-16
                                                                                                                                                                                                  • Company performance
                                                                                                                                                                                                  • Moore Stephens LLP

                                                                                                                                                                                                        • Figure 48: Segmental turnover analysis of Moore Stephens, 2017
                                                                                                                                                                                                        • Figure 49: Financial Analysis of Moore Stephens, 2013-17
                                                                                                                                                                                                      • Company strategy:
                                                                                                                                                                                                      • PricewaterhouseCoopers LLP

                                                                                                                                                                                                            • Figure 50: Segmental turnover analysis of PwC, 2017
                                                                                                                                                                                                            • Figure 51: Financial Analysis of PwC, 2013-17
                                                                                                                                                                                                          • Company review & strategy:
                                                                                                                                                                                                            • Clients are number one
                                                                                                                                                                                                              • Growth underpinned by technology
                                                                                                                                                                                                                • People empowerment
                                                                                                                                                                                                                  • Backing the tech revolution
                                                                                                                                                                                                                    • Integrity and promoting standards
                                                                                                                                                                                                                    • Smith and Williamson Holdings Ltd

                                                                                                                                                                                                                          • Figure 52: Financial Analysis of Smith & Williamson Holdings, 2013-17
                                                                                                                                                                                                                        • Company strategy:
                                                                                                                                                                                                                        • Market Forecast

                                                                                                                                                                                                                          • Key points
                                                                                                                                                                                                                            • Market prospects
                                                                                                                                                                                                                              • UK economic outlook remains positive despite backdrop of Brexit-induced uncertainty
                                                                                                                                                                                                                                • Acquisitions, partnerships and alliances to continue to revolve around the technology space
                                                                                                                                                                                                                                  • Figure 53: Forecast UK market for accounting & financial management, 2018-22
                                                                                                                                                                                                                                  • Figure 54: Forecast UK market segmentation for accountancy & financial management, by type of service, 201822
                                                                                                                                                                                                                                • Audit and accounting
                                                                                                                                                                                                                                  • Tax services
                                                                                                                                                                                                                                    • Consultancy
                                                                                                                                                                                                                                      • Corporate finance and business recovery
                                                                                                                                                                                                                                        • Figure 55: Forecast UK market segmentation for accounting & financial management, by type of service, 2018-22
                                                                                                                                                                                                                                    • Further Sources & Contacts

                                                                                                                                                                                                                                      • Trade and professional 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 2018
                                                                                                                                                                                                                                                      • CIPFA annual conference 2018
                                                                                                                                                                                                                                                        • Trade magazines
                                                                                                                                                                                                                                                          • Accountancy Age
                                                                                                                                                                                                                                                            • CCH Daily inc. Accountancy Live
                                                                                                                                                                                                                                                              • Tax Advisor
                                                                                                                                                                                                                                                                • Taxation
                                                                                                                                                                                                                                                                  • The Accountant

                                                                                                                                                                                                                                                                  Accounting and Financial Management - UK - February 2018

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