Accountancy firms thriving in volatility
Adaptable firms are finding they can chart the right course despite market volatility, reports Robert Outram.
How have the big firms performed, worldwide, over the past year? That’s not as simple a question as it sounds. Grant Thornton, for example, recorded a fall in dollar terms from $4.7bn to $4.6bn; but in terms of revenue, it recorded growth of 6% in its various member firms.
EY recently reported just over 3% growth in headline revenues, to $29.6bn for the financial year ending 30 June 2016, but in local currency terms revenue was up 9%.
The reason for the discrepancy is down to exchange rates. During 2015 the high value of the dollar meant that growth in other markets wasn’t reflected in headline revenue figures. More of that seems inevitable for 2016/17.
The firms themselves, however, appear to be thriving on volatility. EY’s Global Chairman and CEO, Mark Weinberger, announcing his firm’s latest results, said: “We are seeing continued global economic headwinds including geopolitical uncertainties, divergent monetary policy and turbulent emerging markets.
Significant investment in our people and new technologies has allowed us to respond to the dynamic environment.
"Our sustained, strong growth rate over the past several years is the result of the quality and value our people are bringing to the market. Significant investment in our people and new technologies has allowed us to respond to the dynamic environment.”
Information technology has been a key priority across the profession. PwC’s Global Chairman, Bob Moritz, announcing his firm’s figures last month, said: “The world is changing rapidly and we are planning the services our clients, capital markets and other stakeholders will need tomorrow, as well as serving their needs today.”
Meanwhile, as the UK prepares to leave the EU, Deloitte has opted for integration. The firm’s UK partners have voted in favour of a combined Deloitte North West Europe firm from 1 June 2017.
Steve Williams, Senior Partner for Deloitte in Scotland and Northern Ireland, commented: “The creation of Deloitte North West Europe will have a very positive impact for our clients.
"It will allow the firm to create a supranational oil and gas centre of excellence, focused on Aberdeen, and extend the financial services footprint in Scotland into the Nordics.”
We can expect business confidence to be on a rollercoaster in the short term.
David Gwilliam CA, RSM’s UK Chief Operating Officer, said his firm has been expanding its range of services through the acquisition of specialist consulting, HR and related employer-solution services.
He added: “The coming years will be dominated by questions around the impact of Brexit. By the government’s own admission, we can expect business confidence to be on a rollercoaster in the short term.
"But another huge challenge facing the profession at the moment is the ongoing war for talent. Recruiting and retaining the best talent is an issue affecting all firms.”
Accountancy firms in Scotland have been contending with Brexit along with extra issues such as the possibility of a second independence referendum and the impact of the ongoing low oil price.
At KPMG, Catherine Burnet CA said: “The economy is changing quickly, and we need to be ‘fleet of foot’ to adapt so that we are providing clients with the best possible advice and service.
"The impact of technology on the sector means there are, maybe, more opportunities to provide resilience and security advice, as well as how technology can be adopted to meet consumer demand.”
Weathering the storm
Martin Gill, Partner and Head of Accountants and Business Advisers at BDO LLP in Scotland, commented: “BDO’s growth this year has been very satisfying and we continue to expand our services and the size of our team to manage growing client demand.
"Some areas, such as the financial modelling and assurance services team within BDO consultancy and the corporate finance team, have had an outstanding year and we believe that this will continue in the coming 12 months.
"The core elements of the practice such as tax and audit continue to perform well on the back of some significant new client wins.”
We’ve never seen a time when clients are looking for more support and advice.
Sandy Manson CA, Chief Executive of Johnston Carmichael, said: “We’ve never seen a time when clients are looking for more support and advice. That being said, the SME population is generally in good health.
"There is also increasing internationalisation, with many more businesses making connections overseas. With low interest rates there is also greater access to capital. We are seeing more opportunities to provide a very integrated service approach.”
He added that infrastructure and renewables, consultancy and internal audit have been three key areas for expansion, and the firm has brought in extra expertise to deal with the growing workload.
Deloitte’s Steve Williams said: “Our firm delivered 13% revenue growth for 2015/16 [UK wide], and it was a similar story in Scotland where we have remained robust, despite economic headwinds.”
Deloitte has invested both in a new office in Glasgow, at 110 Queen Street, and in technology, with a new digital studio in Edinburgh under way, and an ongoing project with Scottish Financial Enterprise (SFE) to support SFE’s fintech strategy.
We have remained robust, despite economic headwinds.
Energy is a key industry for Aberdeen-based Anderson, Anderson & Brown (AAB). Managing Partner Graeme Allan said: "For our clients, the prolonged downturn in the oil and gas sector is definitely a concern, although those working internationally have to some extent been insulated.”
The international scope of the industry is reflected in AAB’s integrated employment solutions (IES) service, aimed at helping clients deal with potentially complex cross-border employment and tax issues.
Despite the oil industry’s woes, AAB has been able to invest in new purpose-built offices and the firm was this year named as one of the Sunday Times’s “100 Best Companies To Work For” in its annual list.
While the Scottish market did not see a large-scale merger in accountancy this year, steady consolidation continued. Whitelaw Wells, for example, acquired two-partner firm Lyle Crawford & Co, based in North Berwick; while Edinburgh-based Ogilvie & Co joined Scott-Moncrieff.
Scott-Moncrieff’s Stewart MacDonald CA commented: “We are one year into a five-year plan, and we are performing as intended. We have targeted ourselves with 50% turnover growth in five years, and this past financial year we achieved 10%.
"We are ‘on-track’ and very positive about both the road ahead and the team driving the business.”
EQ Accountants has also seen growth over the last year, and its headcount has risen by 15% in the past 18 months.
For the coming year, Managing Partner David Cameron CA, said: “I see challenges but also opportunities. We feel we are ahead of the game in terms of providing support to our clients that is more ‘advisory focused’.”
As an example, he cited the growth of 20% in the firm’s 'virtual finance office' function, a cloud accounting-based service, in the last 12 months.
I see challenges but also opportunities. We feel we are ahead of the game.
He also expects to see more consolidation ahead in the accounting sector, driven above all by technology and HMRC’s Making Tax Digital initiative.
Campbell Dallas acquired Ayrshire-based White & Co. Chris Horne CA, Managing Partner and Head of Corporate Finance, said that there has been “a notable increase” in the number of large companies working with Campbell Dallas.
He added: “We have four goals – happy staff, quality of advice and service, happy clients and financial strength – and we are delighted that all four areas have performed strongly.
"Turnover has grown by about 10% and we will continue to see growth opportunities if we maintain focused on our objectives.”
Brexit: Challenges and opportunities
It’s accepted that the UK’s decision to leave the EU will be a major issue for the coming year. Exactly how that will affect accountancy firms and their clients, however, is much less clear.
KPMG's Catherine Burnet CA said: “It’s possibly too early to say. In the immediate months after the decision there was perhaps a pause in some activity, but that could easily be attributed to the timing of the vote immediately before the summer holidays.
"We’ve spent a lot of time talking to clients to convey the messages that this is going to be a long process with a significant level of negotiation and detail to be agreed upon. In the meantime, it’s important we don’t lose sight of business as usual.”
Chris Horne of Campbell Dallas agreed: “We haven’t really seen any fallout yet and don’t see any signs of any significant problems in the near future. Businesses are rational and adapt to change.”
It’s important we don’t lose sight of business as usual.
Deloitte’s Steve Williams is “cautiously optimistic” about prospects for the UK economy and for his firm, and confirmed Deloitte is working closely with its clients to support them through the 'new reality'.
He added: “Also imperative now is that we ensure that we maintain access to a highly skilled, international workforce – making sure we continue to be one of the top destinations for the best talent.”
Johnston Carmichael’s Sandy Manson is also upbeat: “Whatever happens, businesses will need trusted advisers who can give valuable advice on how to minimise risk and maximise opportunities in the fast-changing economic and political environment. Provided we continue to be proactive, there will be opportunities for our firm and firms like us.”
Find out more
This research was undertaken by CA magazine. Read the full report in the November 2016 issue of CA magazine.