Series of mergers between largest 10 firms sees shakeup at the top — with more to come
The combined fee income of the largest 75 UK accountancy firms increased by more than 4% in 2013 to reach nearly £11.5bn. The findings are contained in the latest annual survey in Accountancy magazine (www.accountancylive.com), published by Wolters Kluwer UK.
While the UK sector as a whole continued to grow its income, average profits among the top 75 firms increased by a modest 1% and staff numbers saw a rise of almost 4%.
“The results of our 2013 survey display a contrasting picture of the fortunes of the largest UK firms, in a year where there have been two major mergers at the mid-tier level, which in the long term will affect the composition of the accountancy profession,” says Sara White, Accountancy’s editor.
“On a positive note, fee income is picking up as firms begin to see a turnaround in the economy and signs of increased merger and acquisition activity.”
Three-quarters of the sector’s fee income is earned by four firms — PwC, Deloitte, EY and KPMG. Together they accounted for than £8.7bn in fee income in 2013, an increase of £352m on the previous year. PwC keeps its number one position ahead of the field with reported fee income of £969m, up 1% on 2012.
All four firms managed to increase their fee income, but with varying degrees of success. While Deloitte pushed up its fees by 8% and EY by 5.5%, PwC only recorded 2.6% in fee growth while KPMG struggled to achieve a 0.4% increase. But the profitability story is different, with KPMG outstripping its competitors by producing a 30% increase, driven by a series of job cuts and restructuring across the firm.
It was a different scenario at the other Big Four firms. Deloitte’s profitability fell by 22%, with both PwC and EY recording more modest increases of 2% and 3% respectively.
Sara White says: “The big four are taking different approaches to managing their businesses. EY, in particular, has focused on hiring more professional staff in the coming year and was the only firm among the Big Four to show an increase in staffing levels last year.”
“KPMG’s approach has been different, attacking its cost base so that it was able to increase profits by 30% while seeing its fee income growing marginally to £1.81bn.”
Outside the four largest UK firms, 2013 presented a complex picture of mergers, acquisitions, administrations and rescues. This resulted in some mid-tier expansion and new entrants into the top 50 of the survey’s rankings. The demise of RSM Tenon, the big story of the year, was a significant element in the shuffling of some league positions.
Sara White says: “Johnston Carmichael was also part of another intriguing move, as it joined PKF International. The international network had been left high and dry by the departure of its UK firm when PKF (UK) merged with BDO last year. This left PKFI with a large hole to fill with no obvious single firm available to fill it. So instead, the network took a more regional approach, signing up Johnston Carmichael to cover Scotland and the North, Cooper Parry for the Midlands and Littlejohn for London and the South East.
“The move is interesting as it points to the prospect of a new top 10 firm if the three members, plus any subsequent joiners, bring their operations closer together.”
The survey report, entitled ‘Year of Cuts and Mergers’, is based on the annual league table of the UK’s top 75 accountancy firms calculated on fee income by Wolters Kluwer from information provided by the firms themselves. The report can be downloaded here: www.accountancylive.com/top-75-uk-firms-survey-year-cuts-and-mergers
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