Training facilities for chartered accountants in the UK could reach crisis point in the next few years as the major institutes struggle to find places for new students. Statistics collected by Accountancy magazine suggest that the ICAEW's plan to encourage smaller and medium-sized firms, in particular, to train more students is unlikely to solve the severe lack of available training places.
As part of our survey of the Top 60 firms in the UK, this year we asked for details of their students under training contract with the major accountancy bodies in the firms. The results show, as expected, that the Big Four firms still carry out the bulk of training of new accountants in the UK - 64% according to our survey. The flat market conditions in recent years, however, have seen the Big Four cut back on student intake, which has left the chartered institutes with something of a crisis as demand for places far outstrips supply.
Institutes compete
The competition for the prize of fastest-growing accountancy body is intense, with the ACCA, CIMA and ICAS all claiming the top prize. According to CIMA, it has seen 6.4% average annual growth in students worldwide since 1996. Even so, CIMA students among the Top 60 barely number more than 100. The ACCA is, in fact, the second largest trainer in our table with over 760 students - a small drop in the ocean compared with its 320,000 students in training worldwide. The figures suggest that those institutes that are able to train their students overseas or in an environment other than public practice are much better placed to grow their membership significantly in future years.
The Scottish institute's annual report says that ICAS 'is now the most rapidly growing accountancy body in terms of student membership, with an average growth of 13.8% since 1997'. Certainly, ICAS's student numbers have grown steadily in the past five years, from 1,235 in 1999 to 2,386 in 2003 but, as ICAS training director Mark Allison points out, the increase can be explained by the decision of Ernst & Young and PricewaterhouseCoopers in 1999 and 2000 to train more of their students under ICAS contracts rather than ICAEW.
'All E&Y students in the UK now train with ICAS, as well as around 40% of PwC's total students and all of KPMG's tax students,' said Allison.
'So the increase in our student numbers is arithmetical rather than anything to do with the economy or market trends. The numbers will hit a peak in 2004 and then begin to fall.'
Flat market
In fact, both the ICAEW and ICAS agree that the market for students is flat, despite huge demand for training places. 'We have far more students wanting to train than training places available,' says Allison, 'and the ICAEW has the same problem.'
Last month ICAEW president Paul Druckman told PASS magazine, Accountancy's sister publication for trainees, that the lack of training places was a serious problem for the institute, and an issue that it was attempting to address as a matter of urgency. With the Big Four firms cutting back on trainees in recent years as the market flattened, the ICAEW plans to concentrate on smaller and medium-sized firms. 'We have a campaign to tackle (the lack of training places),' said Druckman. 'There is a lot of misinformation in the market, particularly among smaller firms.' He added, though, that the number of ICAEW students in smaller firms has grown markedly over the last five years, 'so the message is getting through'.
Smaller firms
Allison added, however, that the number of ICAS students trained in smaller firms has remained largely static in recent years. 'I don't see smaller firms as an avenue that is going to lead to more training places being made available,' he said.
In fact, there is some doubt about the appetite of some smaller firms to train students at all. Some firms find the cost and disruption of training contracts too much to bear. The ICAEW took steps to reduce the amount of study leave required by its training contract in an attempt to appease smaller firms, but there are still consistent complaints about the disruption training causes to smaller firms. When the audit threshold rise was announced recently, for instance, smaller firms warned that the increase could result in fewer students choosing to train with them because they could no longer guarantee a good variety of experience.
If smaller firms are not the answer, the institutes could be running out of options. ICAS has questioned firms about the 'substitution effect' - whether, in other words, they are happy with the mix of ICAS and ICAEW students, and the answer seems to be that the firms are content. 'In which case, we have to question where the extra training places are going to come from,' said Allison.
Longer training contracts
Among the options that may be considered by ICAS and the ICAEW are places for non-graduates, which would require a longer training contract under International Federation of Accountants requirements.
In fact, a longer training contract for all trainee accountants could become the norm in the future, some education experts point out.
The wide range of knowledge and experience expected of chartered accountants, combined with professional developments such as the move towards international standards, have greatly increased the learning curve for newly qualified accountants. There may come a time when a three-year training contract is no longer considered to be enough. Longer contracts will, of course, have significant implications for training firms, both large and small.
HOW WE COMPILED THE TABLE
Firms supplied us with the number of students they employ under each particular institute as part of the information on the questionnaires for their entries in our annual Top 60 survey published in last month's issue. As you can see, a few of the firms did not appear to know how many trainess they employed and with which instititutes. Given their materiality, we have made estimates as detailed below for the Big Four, based on published information and estimates acquired from other sources.
These are detailed below:
1. PricewaterhouseCoopers was unable - or unwilling - to provide any information, so all figures have been estimated by Accountancy.
2. Deloitte - information supplied by the firm.
3. KPMG - information supplied by the firm except for CIMA and CIPFA, which are estimated by Accountancy.
4. E&Y - ICAEW and ICAS figures supplied by the firm. Others estimated by Accountancy.
5. PKF says its ACCA number is approximate.
6. Moore Stephens says its figures are approximate.
7. WJB Chiltern declined to fill in the Top 60 questionnaire.
8. Haysmacintyre says its figures are unavailable.
| ACCOUNTANCY TOP 60 FIRMS - TRAINEES EMPLOYED Pos Firm Total trainees ICAEW ICAS ACCA CIMA CIPFA 1 PricewaterhouseCoopers 1 2,160 1,150 760 120 70 60 2 Deloitte 2 1,460 1,200 100 70 70 0 3 KPMG LLP 3 1,235 950 145 10 40 30 4 Ernst & Young 4 955 30 613 270 40 2 5 Grant Thornton 281 206 15 55 5 6 BDO Stoy Hayward 305 235 13 53 4 7 Baker Tilly 413 300 40 70 3 8 PKF 5 192 130 15 40 0 7 9 Smith & Williamson 57 57 10 Moore Stephens 6 100 11 Tenon Group plc 146 80 10 50 4 2 12 RSM Robson Rhodes 106 78 16 4 8 13 Mazars 142 110 4 25 3 14 Horwath Clark Whitehill 112 82 10 20 15 Numerica Group 41 41 16 Haines Watts 53 22 5 26 17 Bentley Jennison 132 40 4 80 4 4 18 WJB Chiltern Group 7 19 Saffery Champness 28 22 5 1 20 Kingston Smith 66 63 2 1 21 Chantrey Vellacott DFK 31 29 2 =22 UHY Hacker Young 64 43 6 13 2 =22 Vantis plc 45 40 5 24 Menzies 46 35 11 25 MacIntyre Hudson 80 65 12 3 26 Wilkins Kennedy 38 32 5 1 27 Solomon Hare 24 21 2 1 28 Armstrong Watson 18 15 3 29 Haysmacintyre 8 30 Johnston Carmichael 13 9 4 31 Buzzacott 27 19 8 32 Reeves & Neylan 26 10 5 11 33 Rothman Pantall & Co 35 14 21 =34 Cooper Parry 23 18 5 =34 Lovewell Blake 36 13 23 36 Francis Clark 13 12 1 37 WBS 11 10 1 38 Scott-Moncrieff 35 22 12 1 =39 Littlejohn Frazer 33 25 8 =39 Price Bailey 24 3 20 1 41 Duncan & Toplis 24 16 8 42 Blueprint Audit 110 80 28 2 43 Larking Gowen 36 18 18 44 DTE 9 2 6 1 45 Hazlewoods 30 25 5 46 AGN Shipleys 23 16 7 47 Mercer & Hole 15 15 48 CLB 12 10 2 49 HLB AV Audit 0 =50 Haslers 9 7 2 =50 Nexia Audit 0 52 Morley & Scott 22 17 5 =53 Bishop Fleming 16 10 6 =53 Berg Kaprow Lewis 11 10 1 =53 Pridie Brewster 20 13 7 56 Streets 17 9 7 1 57 Simmons Gainsford 12 12 =58 Barnes Roffe 14 10 4 =58 James & Cowper 18 10 8 =58 Lubbock Fine 14 14 Totals 9,018 5,494 1,816 1,238 255 115 Trainees at ALL Top 60 firms ICAEW 5,494 ICAS 1,816 ACCA 1,238 CIMA 255 CIPFA 115 |
The total of 9,000 trainees can be put into context by comparing it to the total of 5,062 partners in the Top 60 firms, and 53,841 professional staff, according to the Top 60 survey published in last month's Accountancy.
The Big Four firms dominate. Of the 9,000, just over 5,800, around 64%, are employed by the Big Four. Accountancy has not carried out this survey before so it is not possible to compare the figures with previous years.
However, ICAEW has suffered from falling student numbers in recent years, losing out in particular to ICAS.
| TRAINEES AT THE BIG FOUR FIRMS ICAEW 3,330 ICAS 1,618 ACCA 550 CIMA 220 CIPFA 92 |
The ICAEW has the lion's share of trainees at the Big Four, but with 57% of the firms' total students, its hold is weaker than for the Top 60 as a whole. This reflects in particular decisions by PwC and E&Y to train large numbers of their students with ICAS.
The 5,800 trainees at the Big Four compare to a total of 2,351 partners at the firms and 35,575 professional staff. This means there are roughly two trainees for every partner.