This could prove to be a watershed year for the accountancy firm landscape in the UK. While the Big Four firms – Deloitte, EY, KPMG and PwC – have been grappling with their headcounts, the mid-tier and small firms have been in expansionary mode, taking on private equity investment, making numerous acquisitions, and in one case preparing for a float on AIM.

At the same time, fee income may have risen across the board, but there is a marked difference between the Big Four, where growth has been flat, and those coming immediately after.

However, whether this picture will continue remains to be seen – will the slowdown at the top feed into lower growth elsewhere, or will the mid-tier take advantage of changing market conditions, snap up consultants from the big players, continue the investment-led acquisition spree and help drive much-vaunted business growth in the UK market?

Overall, the fee income of the UK’s Top 75 Firms has grown by 5.7% in the past year. According to Business and Accountancy Daily’s annual survey, fee income rose to £23.23bn in 2023-24, up from the previous year’s £21.98bn.

For this year, the survey has stripped out significant overseas income from two Big Four firms - £825m from Deloitte’s Swiss practice and £1,973m from PwC’s Middle East practice – in order to give a more accurate picture of the UK market.

Not only does this take out £2.8bn, but it also swaps the order of the top firms. Looking purely at UK fee income, Deloitte tops the league table with £4.92bn, an increase of 1.7% over its previous year’s figures. PwC is in second place, with £4.353bn in fees, 3% higher than last year’s total. The positions would have been the same last year, so in effect there has been no change.

EY showed no growth, reporting £3.701bn fee income, up a mere £2m on last year’s figures, while KPMG revealed just 1% growth to £2.99bn.

Last summer KPMG announced it planned to cut some 200 back office and client facing roles following a review of its cost base. A spokesperson at the time said: ‘Like the rest of our sector we are still operating in challenging market conditions, which is why we have made the difficult decision to consult on proposals to reduce our cost base by simplifying ways of working in our central services, as well as matching our client-facing resources to demand.’

More recently, it has emerged that EY plans to cut consulting partner numbers with up to 30 members of the partnership due to face the axe. This follows more than 100 job cuts across the consulting team. In a statement, EY said: ‘We continually assess the needs of our business and make adjustments when required.’ This was possibly not the most auspicious of starts for Anna Anthony, who was elected as the firm’s UK & Ireland managing partner, the first woman to hold the position, back in October 2024.

So, the outlook for the Big Four, long the powerhouse of the accountancy firm market, might not be particularly rosy, but what about the rest?

Private equity boom

If the level of private equity investment is any indication of future prospects, then the future could be sunny. At the end of last year, Grant Thornton, which is now ranked 7th in the Top 75 with a fee income of £654m (up 7.2% but not quite enough to prevent it from being leapfrogged by Evelyn Partners), announced that it had secured investment from Cinven.

Armed with this war chest, Grant Thornton says it expects to reach £1bn in fee income ‘over the coming years’. Such a move would put it on a par with BDO, which this year become only the fifth UK firm to break through the £1bn fee income barrier.

‘We recognise the opportunity that external investment can offer to help us further accelerate our growth, whilst retaining our partnership structure and ethos,’ said Malcolm Gomersall, Grant Thornton’s CEO.

Private equity clearly believes there are good returns to be made from the accountancy sector, and the Top 75 survey would appear to bear this out. Some 17 firms this year reported that they are backed by private equity, and collectively, these firms have seen their fee income rise by 19.8% to £2.73bn [FY23: £2.28bn], compared with an overall average of 5% for the whole of the Top 75.

Evelyn Partners (ranked 6th with £656.6m in fees this year) is backed by Permira Funds and Warburg Pincus, and now that it is being spun out from its wealth management business and is set to return to its S&W branding (the firm used to be called Smith & Williamson).

Azets, the consolidator that was originally set up by former Deloitte senior partner John Connolly, is currently backed by Hg and PAI Partners, and is firmly ranked ninth in the Top 75 ranking with revenue of £405m, up 12% year on year.

Sumer has experienced 42% fee income growth to £188.5m to mark its first appearance in the league table helped by the backing of Penta Capital. Once again this firm was started by a former Big Four partner, Warren Mead, who was at KPMG.

Xeinadin continues its growth trajectory with a 19.4% increase in fees to maintain its 18th position with £134.3m in fees, helped by the backing of Exponent. ‘Organic growth is strong,’ says Tim Halford, Xeinadin’s chief commercial officer, ‘and we have been very active in bringing in new businesses.’

New joiners have included Watford-based Landmark, Devonport in Essex and teams from Haines Watts. ‘We are fast becoming a nationwide accountancy practice, and we want to be a recognised name for where SMEs can go to use our accountancy and advisory services,’ says Halford.

Likewise, it has been a busy time for Sumer – the new group has seen six ‘regional hub’ deals in the past year, including HW Fisher, which was the largest firm to join, alongside Carpenter Box, Cowgills, EQ, Monahans and Simmons Gainsford, all of whom have featured in previous annual Top 75 surveys in their own right.

‘It has been a very busy year,’ says James Taylor, Sumer’s chief client officer. ‘In the last two years we’ve done 24 acquisitions, 12 as regional hubs. But we are also expecting to see organic growth continue at a similar pace.’

Like Xeinadin, he sees Sumer as being the ‘champion for the SME sector’, a segment Taylor believes has historically been underserved.

‘If you go back over the last eight years or so and think about some of the disruptions that have impacted that profile of business, from Brexit, supply chain challenges, the mini budget, and the cost of living crisis, it has been a really difficult period and sometimes SMEs are not getting the support that they deserve,’ Taylor explains.

‘So being the champion of SME businesses means becoming a business platform for them and offering an ever-deepening pool of services to them.’ This is now set to include legal services, which Sumer is building organically.

Beavis Morgan and Duncan & Toplis recently came together under the Kinbrook umbrella, a move that now places them in the Top 30 with a combined fee income of £61.4m.

Backed by investment from Blixt, the combined firms plan to invest in career development, training and leadership programmes, as well as in technology to improve efficiency.

‘Our growth strategy is about strengthening what we do best – supporting SMEs build and preserve wealth and enhance the value of their businesses – while creating opportunities for our people to develop,’ says Paul Jackson, chair of the Beavis Morgan Group. ‘For Beavis Morgan, this means expanding in London and the south east in particular, both organically and through acquisitions, as we establish ourselves as Kinbrook’s hub in the region.’

Both firms will continue to operate independently, retaining their leadership, teams and client relationships, while leveraging the resources and expertise of the wider group.

Jackson adds that the firm is not looking for growth for the sake of it. ‘We want to bring in businesses that complement our existing expertise and offer genuine opportunities for our people and clients,’ he said. ‘Whether that is firms with strong SME client bases, specialist capabilities, or teams that share our approach to client service, we are looking for partners who add long-term value.

‘Our priority is to grow sustainably while maintaining the independence, culture, and identity that makes each firm successful. The Kinbrook model is built around supporting independent businesses, not forcing them into a one-size-fits-all approach.’

Independents expand through M&A and organic growth

Other firms continue to grow through straight forward acquisitions – in June 2024, Crowe (15th, £164m fee income) merged with Kent-based Dendy Neville, a three-partner firm.

‘In 2025, there will be a need for firms to continue to add breadth and depth to their service offering for new and existing clients in an ever increasingly competitive market,’ says Nigel Bostock, Crowe’s chief executive. ‘Challenges continue to exist in terms of resource constraints, the perception of the attractiveness of the profession and the increasing expectations of the regulatory market.

‘With challenge also comes opportunity as firms focus on what differentiates them in the market in terms of client experience, quality and ease of doing business.’

Bostock adds that there is an increasing need to continually improve quality ‘in everything we do’ and that no firm is immune to this. ‘Increasing expectations of what the industry has to offer and changes in the regulatory market have seen continued advancements in technology, data tools and adoption of AI to support back-office functions and improve standards,’ he says.

This has seen Crowe recruit staff for growing service lines such as corporate finance, sustainability, cybersecurity, governance and risk, and artificial intelligence (AI).

Going public with AIM listings

Of course, private equity is not the only route to securing investment to grow services – over the years, a number of firms have tapped the public equity markets, notably the consolidators of the early 2000s such as Tenon and Vantis, as well as the current listed firms in the Top 75, Begbies Traynor, the corporate recovery specialists, and Dow Schofield Watts, the corporate finance boutique.

However, we will shortly be welcoming a new firm to the public markets. MHA, a network originally based around MacIntyre Hudson, has just revealed its intention to float on AIM.

The group is seeking to raise up to £125m that will provide growth capital as well as enabling ‘a sell down by certain partners’, according to the prospectus. Alongside the placing, the group intends to offer £6m in shares to retail investors giving them the chance to join the action, details of which are expected at a later stage, and will depend on the success of the placing.

Currently placed 14th in the Top 75 survey, with a fee income of £180m, which was bolstered by the arrival of Moore & Smalley into the fold in April 2024, the floated group’s ambition is to break into the top 10.

As managing partner Rakesh Shaunak says: ‘The additional capital would enable us to accelerate expansion and enhance our capabilities, helping us move more efficiently and sustainably towards our medium-term goal of exceeding £500m in annual revenues.’

It is a move that other firms that are contemplating external investment will be watching with interest.

Profits down year on year 

Fee income may still be rising, but for those firms that declare their profits, the news is not so good. Profits among the 42 firms that do publish these details are down 10.5% on the year to a combined £3.87bn, compared to £4.34bn the previous year.

In terms of the Big Four, Deloitte, the top UK firm, saw its pre-tax profit fall 41% from £1.15bn to £680m on £4.92bn revenues [FY23: £4.83bn], with PwC, ranked second, down 8.5% at £1.29bn [FY23: £1.42bn] on fee income of £4.35bn, which was up 3% year on year.

Third largest EY saw profits fall by 1% from £659m to £653m while revenue was virtually static at £3.70bn [FY23: £3.69bn]. Rounding off the Big Four, performance was stronger at KPMG, which reported an 11% increase to £404m, up from £364m although revenue again was only up slightly by 1% at £2.99bn [FY23: £2.96bn].

It was a different story for some of the mid tier firms – BDO, ranked fifth, continued its stellar growth, achieving a 16% hike in profits to £226.4m [FY23: £195m] with revenue breaking the billion pound barrier for the first time at £1.015bn, up from £935m year on year.

The sixth largest firm, Evelyn Partners, reported a 9.3% increase in revenue to £656.6m [FY23: £600.8m] but pre-tax profit was down 15% to £45.3m compared with the previous year’s £53.5m.

Grant Thornton increased its profits by 18% to £143m, up from £121m with revenue up 7.2% at £654m, but dropped a place in the rankings to seventh. New firm on the block Sumer declared a 12.5% increase in profits to £44.1m with consolidated revenue of £188.5m, up an impressive 42%. The acquisitive growth has jumped into the Top 20 through a flurry of M&A activity, and is now ranked 13th.

Cooper Parry, another private equity backed firm, is also pursuing an ambitious buy and build programme, and swapped investors last autumn. It is now ranked 20th with revenues of £120m, up 127% year on year, but made a loss of £73,072 for FY24, compared with profit of £889,902 in FY23.

Private equity investors will be looking as much at these figures, perhaps more so, than the fee income figures when deciding to make further investments into the sector.

Advisory and deals activity slows down

One of the notably features of this year’s survey is the relative slowdown in advisory work – and this has been one of the reasons that the Big Four in particular have been reviewing their staffing levels.

While the top 20 firms for assurance services have seen their combined audit and accountancy fees increase by 12% to hit £6.8bn, the top 20 firms for advisory services saw their fees go up by a mere 3%, from £10.9bn to £11.2bn.

Among the Big Four, only PwC managed to grow its advisory income, while Deloitte, EY and KPMG saw their incomes fall by 1%, 7% and 4% respectively. This is in marked contrast to last year’s survey, which recorded 12% growth, although KPMG, which has a later year end than the other Big Four firms, signalled the slowdown by recording just 2% growth.

Given the contribution that advisory services make to overall income, this slowdown could yet put a break on overall growth.

Fees from tax work have also slowed considerable. The top 20 tax advisers saw only 5% growth in this year’s survey, compared with 14% growth last year.

People business

The number of people working in the Top 75 continues to grow. There are now more than 150,000 people employed in the top UK firms – last year’s survey recorded just over 146,000 staff. The number of partners continues to climb as well, despite attempts at the very top of the league table to curtail the growth. Last year, there were just over 8,000 partners in the Top 75; now there are more than 9,000.

There continues to be a small but positive movement on the number of female partners and those from an ethnic minority background. Over the 9,000 partners in this year’s Top 75 survey, 2,400 are female and 776 are from ethnic minorities, representing 27% and 8.6% respectively of total partners. Last year, the percentages stood at 25% and 8.4%. Unfortunately, many firms still fail to report these figures. Progress, but at a glacial speed. 

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About the author

Philip Smith is a contributing editor to Business & Accountancy Daily and business analyst for the Top 75 Firms Surveys

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