The number of UK accounting firms was beginning to decline prior to the Covid-19 pandemic, but bookkeeping businesses are in an accelerated growth phase, according to research by cashflow specialist Float
Its analysis, based on data from the Office of National Statistics (ONS), shows that between 2011 and 2017, the number of accounting and auditing firms in the UK grew by 7,270 (an average net growth of 1,212 extra firms per year).
However, by contrast, in the subsequent period 2017-19, the UK had a net loss of 490 firms. Over the same time period, the number of bookkeepers in the UK continued to grow, rising by 395 to reach a total of 6,640.
The report found accounting firms with a turnover of less than £100,000 decreased by 5.4% between 2017 and 2019, dropping from 21,020 to 19,890.
Larger firms, with a turnover of more than £100,000, increased by 4.3%, from 14,985 to 15,630.
The analysis also suggests the partnership model has fallen out of favour in the last decade. While there were 3,125 accounting firms classified as a ‘partnership’ in 2010, but this number has nearly halved, falling to 1,745 in 2019.
The number of sole traders recognised by the ONS also reduced by nearly 3,000 (from 7,980 in 2010 to 5,150 currently). The number of accounting firms registered as a company increased from 17,975 to 28,565 over the same period.
Colin Hewitt, Float CEO and co-founder, said: ‘The UK accounting industry now has a smaller number of more profitable accounting firms, following years of growth at the lower end of the market.
‘We witnessed a great accounting boom in the UK this decade, with it being easier than ever to set up and run a new firm.
‘This appears to have tailed off more recently, as we also saw increased market consolidation over the last two years which has contributed to a net reduction in firms.’
Hewitt went on to point out that bookkeepers remain in what he dubbed ‘an accelerated growth phase’, driven in part by advances in technology.
‘Cloud accounting services, smartphones and the introduction of Open Banking mean bookkeepers can scale up like never before. Bookkeepers today can provide better, more efficient and more accurate services to more customers, thereby helping clients make better business decisions,’ Hewitt said.