The bank’s second accountancy benchmarking report, which analyses firms sitting outside of the UK top 50, found the accountancy median PEP was £21,000 higher than in legal firms, with the lower quartile at £59,000 and the upper quartile at £222,000.

Smaller firms led the way, with a 10% hike in PEP, whereas the large and very large firms recorded gains of 3%. Highest payouts were in the London and South East region at £237,000, while the figure for the North East, North West region was less than one third of this at £69,000.

The research also showed 6% fee growth, with the South West leading the pack with a 9% increase.

Annual fee income per equity partner showed considerable range, which NatWest said reflects as much the focus among firms to control their costs as it does their focus to increase fees. The overall median figure was £551,000, with the lower quartile at £401,000 and the upper quartile at £863,000. For very large firms, the figure was almost double that, at £1m, showing the economies of scale that impact the bottom line.

NatWest’s analysis suggests that despite healthy growth figures, accountancy firms need to review their approach to working capital, work in progress (WIP) days and lock-up.

For instance, the median firm took 115 days to turn time spent into cash. If a firm had fees of £551,000 per equity partner, it needed capital of one third of this (£180,000) to finance the lock-up before any other investment could be considered.

There was no significant change to lockup across small, large and very large firms but according to the data, a median firm would run out of cash if it did not receive any more money from clients in the following 36 days.

Steve Arundale, head of professionals at NatWest said: ‘It’s great to see firms continuing to perform well across most areas, although focus is still needed around efficiency.

The report analysed the financial performance of 88 firms across the UK and pointed to a need for a greater focus on productivity and investment in their staff and technology.

Arundale said: ’As cloud and other accounting software systems become simpler to use, but more sophisticated in what they can do, there is a client expectation that fees should fall, so it has been challenging to move towards value added consultancy type arrangements, from the traditional compliance work.

‘Firms therefore need to focus on productivity and invest in their staff and technology so that the best people are not enticed away and so that they can deliver sustainably profitable services.

‘Clients will pay for a good service and so firms must focus on how they are differentiating in a competitive market if they are to attract premium work; developing a real specialism or niche is going to help and this can be done by even the smallest firms.

‘Professional firms continue to struggle with managing their lockup and perhaps it is time to start talking to more clients about a monthly cost rather than an annual fee.’

NatWest’s Accountancy Benchmarking Report is here,

Report by Pat Sweet