Number of accountancy firms in the UK declining

Auther Hayley Kirton Photo By Gwydion M. Williams

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The number of accountancy practices in the UK fell last year as merger activity across the sector rose once again. According to figures released today by commercial finance company LDF, the number of accountancy firms in the country dropped from 6,962 to 6,622 in the year to December 2014, as more businesses combine their activities in a bid to benefit from economies of scale, such as reduced administrative expenses.

High-profile mergers which have taken place in the last 12 months include top-10 firm Moore Stephens with Chantrey Vellacott, Menzies with Harris Lipman, which created a practice with £40m turnover, and Yorkshire-based BHP and Clough.

The appetite for merging in the professional services sector tapered off in 2010 but has picked back up again in recent years.

LDF pointed out that, by consolidating, firms could access a broader range of skills. As the thresholds for audit requirements are set to increase in January 2016 and the government continues to crack down on tax avoidance, accountants may want to move away from traditional audit and tax planning work and diversify into other markets.

“Mergers have been the catalyst for many accountancy firms to start the next stage of their growth, as it gives them the wherewithal to invest in better marketing and IT systems,” said Peter Alderson, managing director at LDF. “As the market recovers, more firms are looking to take advantage of that.

“Merging with another firm that has a different geographical, sector or service line focus can strengthen both practices if the fit is right. Especially for smaller businesses, merging with a larger firm can expand your client base and increase revenue streams.”

LDF has also noticed more practices turning to alternative finance to fund the upfront costs of merging.

The number of sole practitioner accountants has also fallen in the past year, going from 3,625 to 3,421.

Alderson added: “There is also a consideration for any accountants nearing retirement who may also be looking to sell their books of businesses to firms who may be looking to diversify their client base.”