The number of new small accountancy firms and bookkeepers in the UK has boomed since 2018 despite there being fewer qualified accountants joining the industry than since 2016, recently unveiled analysis from IRIS Software Group (IRIS) reveals.
IRIS, a provider of accountancy software, is calling on businesses to “carefully consider” which accountancy firms they work with in 2023. In the current difficult economic times, many business leaders may be tempted to choose the cheapest accountant or bookkeeper to keep costs down, but IRIS warns this could lead to issues the long run. Only qualified accounting professionals can help businesses remain fully compliant with ever-changing legislation while saving the most on tax returns and providing the sound advice needed to survive the tough economic landscape.
IRIS’ comprehensive analysis of the accountancy industry reveals there’s been a ~40% increase in small practices and bookkeepers – increasing from around 55,000 to nearly 77,000 – since 2018.
IRIS head of market insights, Steve Cox, comments, “In 2018, we wanted to get a better ‘feel’ for the size of the accountancy profession. The Office of National Statistics is a great starting point but isn’t an exhaustive data source as it doesn’t include the number of owner-managed or sole trader businesses. Based upon the data available to us in 2018, we estimated the accountancy profession to be around 71,000 firms.”
At this time, IRIS also completed a forward-looking view of the profession’s growth based on trends and future events, forecasting a 10% increase in the number of accounting firms – increasing from around 71,000 to 78,000 – from 2018 to 2023.
Following IRIS’ initial sizing of the accountancy profession in 2018, it has been monitoring the professions’ growth. Continued analysis since 2018, with increased level of analysis and expanded access to new data sources has allowed IRIS to complete a comprehensive size and segmentation of the profession for 2023.
There are now around 94,000 accountancy firmsin the UK, with 636 new practices incorporated in the month of March 2021 alone. This growth has largely been driven by the rise of, owner-managed firms and bookkeepers, who have also taken on more than just managing records, harnessing technology solutions to do final accounts and tax returns.
Cox comments, “We predicted double digit growth in the profession, but the latest analysis showing a 32% growth in accountancy practices over a four-year period has exceeded our own expectations. While the additional data sources have positively expanded the scope of the analysis, there is no denying the growth in the profession. It helps to explain some of the talent and skills shortages existing firms have been facing over recent years – with talent they would previously have hired deciding to go it alone and setup their own firms.”
“Worryingly though, the number of student and qualified members joining established industry bodies like ACCA, ICAEW and ICB is in decline according to the FRC Key Facts and Trends 2022 report. The percentage growth of students in the UK and Republic of Ireland (ROI) declined by 2.1% in 2019-20 and 2.2% overall from 2016 to 2020. Further, the percentage growth of qualified members in the UK and ROI increased by only 1.9% in 2019-20.
Cox explains, “Even accounting for the fact there’s a general trend of new graduates entering businesses, not accountancy firms; the discrepancy between the number of student and graduates affiliated with industry bodies and the boom in new smaller firms is of serious concern for the industry at large. Firms will continue to face talent and skills shortages if there isn’t an increasing future talent pool to resource the growing profession.”
Cox continues, highlighting the three key areas businesses and owner-managers should consider before choosing a new accountant in 2023, “Any firm that doesn’t openly share their qualifications on their website is an immediate red flag. If they don’t, ask why not. Being a member of the ACCA, ICAEW or ICB for example are industry recognised marks of credibility.
“Checking for credibility should also be extended to review sites like Trustpilot and word of mouth reviews. Check to see if they have any positive or negative reviews online. And tap into your industry peer network to see if your colleagues have good things to say about the quality of work produced.
“The final check should be price. If a firm’s prices are significantly below the market average, alarm bells should be ringing. While it’s true highly specialised firms – those who only work with certain types of businesses or in specific industries – can reduce their prices because they’ve streamlined and honed their workflows, this isn’t the norm. Cheap prices might look attractive in the moment, but what corners are they cutting to offer such cheap rates?”