Decline in number of accountancy firms accelerates

A shortage of audit work and HMRC’s campaigns to cut down on tax planning have accelerated the decline in the number of accountancy firms in the UK, according to analysis by finance provider LDF which also says funding remains an issue for smaller firms

LDF says figures from the Financial Reporting Council (FRC) show there were 6,962 accountancy firms registered in the UK in 2013, a 4% drop on the previous year when there were 7,239. Although there has been a sustained downward trend since the credit crunch, with the rate of decline slowing to 1% in 2011 and 2% in 2012, that is now being reversed.

Peter Alderson, managing director of LDF, said: ‘One key reason is that the impact of new rules loosening the requirements for businesses to carry out an audit is starting to filter through, adding to the financial pressures that many, particularly smaller, firms were already feeling.

'Audit is a core revenue stream for many accountancy businesses, so any drop-off in this type of work is going to have a significant impact on profitability.’

LDF points out that accountancy firms with between two and six principals have seen the biggest decline, with a total of 2,997 registered firms in 2013 compared to 3,264 in 2012.

However, the number of firms with 7-10 principals has actually increased to 202, up from 191 the previous year.

The company says that tax planning work is also under pressure as HMRC clamps down on the number of tax schemes it allows, making it more challenging for firms to offer advice and reducing the scope to identify legitimate new planning approaches.

Alderson said: ‘Funding also remains an issue, especially for smaller firms who are still struggling to borrow from banks.

'They are having to look around for alternative forms of finance to help give them the financial cushion they need to manage peaks and troughs in cash flow, pay major tax bills, fund insurance premiums or invest for growth.’


Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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