Grant Thornton sees digital forensics and cyber investment as key for 2018

Head of top five accounting firm Grant Thornton UK LLP, Sacha Romanovitch talks to Accountancy’s Sara White about the firm’s annual results, strategic investments in digital forensics and financial services, and the importance of taking a global view of Brexit

In the 2017 year end results Grant Thornton UK LLP reported a significant drop in fee income to £499.9m, down from £533.8m in 2016 due to the loss of a major government contract, but profitability improved as the number five accounting firm has conducted a root and branch review of the business and has strengthened various services lines, including forensic services and financial services.

It has seen post-tax profit up 10.3% to £75m (2016: £72.2m), although this figure is still down on 2015, when Grant Thornton reported £82m in profits. Underlying revenue growth on a like-for-like basis was 2.5% excluding the cessation of the government funded Business Growth Services contract.

Sacha Romanovitch, CEO of Grant Thornton UK LLP said: ‘We’ve been really focused on income growth, on ensuring that we have a resilient income stream. There has been quite a lot of reshaping the business – focusing where we can we make the biggest difference for our clients.’

This year’s results were hit by the loss of firm’s government contract as consortium leader for Business Growth Services, a nationwide scheme set up by the Coalition government, which was cancelled by then Chancellor George Osborne, in November 2015.

In response to losing the contract, Grant Thornton launched G, its small business and start-up network based in Liverpool. ‘We have invested in G, which is taking the best of that [Business Growth Services] programme - we’ve shown over the years is how we can take business from a really small start-up stage to growing in the UK, going international and being listed.

‘It is all about having a system and a view of the economy, and how we can make a difference.’

Major investments

Part of this overhaul of the business has seen significant investment in specific specialist areas, including digital forensics and finance. This investment has resulted in financial services and forensics contributing a combined 24% increase in profits year-on-year.

‘We have focused on building up the forensic team in terms of digital forensics and fraud investigation, from tracing assets, fraud at individual corporates  to commercial disputes.

‘What we’ve really focused on is bringing in people with complex digital skills and on building up the digital forensics and cybersecurity team. So for example when there was a major cyberattack out of Ukraine last year we were quickly on the ground helping clients to get back up and running. We are investing heavily in that capability.’

Finance is another important sector for the firm, which has had success picking up FTSE 100 related non-audit business, particularly as a result of the tighter controls of auditors under the Audit Regulation and Directive (ARD), which has seen an introduction of a cap on the share of non-audit services the incumbent auditor can handle. With 99% of FTSE 100 audits handled by the Big Four, Grant Thornton has been a beneficiary of the non-audit cap.

‘We act for 51% of FTSE companies and a significant proportion of that is non-audit – it is a great way to build up and develop relationships, and establish our credentials. There is also an important role to have a wider choice in the market where people are conflicted.

‘In terms of financial services, it is only the large firms that can do those audits – one of our massive assignments has been with Barclays on the ringfencing [to separate business and consumer banking].

‘We think it’s really important that we are investing in the expertise – structurally we have invested heavily. Growth in professional services firms needs to come from other areas, not just audit. That is very important for us.’

Risk factors

Brexit is undoubtedly the biggest risk factor facing the UK but there are also opportunities and the UK should not take an insular view. Romanovich stresses the importance of projecting a global outlook and seeing beyond the immediate EU space and domestic uncertainty created by Brexit.

‘In the UK it is easy to think we are the only ones to experience this level of disruption. When you talk to colleagues in other places like Argentina, Brazil, parts of Asia and the Middle East, this level of political and economic disruption is what they deal with all the time. For many places in the world a changing political and trading relationship is the new normal, but their businesses grow and thrive. It is all about resilience,’ said Romanovich.

‘That is what we need to do here – we need to look at the global scenario, it becomes even more important to support our clients across the main trade routes – UK US, UK India, UK China, UK Middle East and of course, UK Europe. We need to take a world view; that is the key thing to think about in a post-Brexit world.’

Report by Sara White

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