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Strong growth in fees for Ireland's accountancy firms as Top 20 fee income rises by 9.3 per cent - Finance Dublin Accountancy Survey 2014 Back
Ireland’s Top 20 accountancy firms have seen a strong uptick in growth following a slowdown in growth last year. Fee income at the top 20 firms has grown by 9.3 per cent, to €1,231.4 million, compared with growth of 1.7 per cent in last year’s survey. Equally striking is the increased growth rate in employment amongst Ireland’s top firms with this year’s figures showing employment up by 7.5 per cent.
Accountancy in Ireland has returned to growth with an industry total growth of 9.3 per cent in what is the largest growth rate since the financial crisis and back to similar growth rates that accountancy in Ireland experienced in the early 2000s. The rate of growth acceleration follows what was a disappointing slip in the growth rate last year when the fee income for the top 20 firms fell to 1.7 per cent from 3.3 per cent in the 2012 survey.

The return to growth follows the post crash falls of 2009 and 2010. Firstly in 2010, fee income fell by 10.1 p.c. and then in 2008-9 there was a drop of 5.1 p. c., which was the first recorded fall in the history of the survey. The survey puts the total of €1,231.4 million not far off , but still slightly shy (97.5 p.c.) of the industry peak of 2008 when the fee income total was €1,263.5m. This makes up for the fall to €1,071.3m in 2011, the nadir of 84.8 p.c. of the 2008 total. The 15.2 p.c. fees contraction following the financial crisis has now nearly been recovered.
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In last year's survey the majority of the firms recorded rises in their fee incomes with only 6 firms recording a fall in their fee income. This year every firm has recorded growth bar one firm (OSK) who fell slightly from €3.7 million to €3.6 million. Notably in last year's survey the top two firms both saw their fee income fall. This year the trend is reversed and both PwC and KPMG have returned to growth albeit at different rates. The return to growth of these two has a significant impact on the total figure given that the fee income of both firms combined is 46.3 per cent, nearly half the total of the fee income of the top twenty firms.

KPMG, which operates a all-island partnership, has grown by 13 per cent and is one of the best performers in the survey. Its fee income grew by the largest amount this year, by €31m, from €239m to €270m. This brings the firm to 87.7 of its peak fee income of €307.7m achieved in 2008. This makes up for the losses between 2008 and 2010 where fee income fell to €231m, a fall of €76.7m from peak, or a 25 per cent fall in just two years.

PwC has also returned to growth but less markedly so with an all-Ireland fee income increase of €4m - 1.3 per cent growth. This increase sees the firm rise to 84.7 per cent of its 2008 peak. For PwC however the impact of the financial crisis on its fee income was not as severe as for other firms (e.g. KPMG whose fall, and rise, has been more pronounced) with its fee income falling by €56m between 2008 (€355m) and 2011 (€299m), or 15 per cent. It is worth mentioning that PwC reports its income for the end of 2013 whereas other firms report after that time and given the improving economy, fee incomes reported this year would reflect the improving economy. The firm's performance this year was however below the top 20 average of 9.3 per cent. On a Republic of Ireland basis alone PwC's fee income increased by 4.2 per cent (from €214m to €223m), showing the slight drag the more recessionary Northern Irish economy is having on its all-Ireland income.

The Big Four as an amalgam was 74.2 per cent of the Top 20 firms, and overall the four firms grew by €76.5 million or 9.1 per cent with big rises for both Deloitte and EY. Deloitte grew by €17 million or 10.7 p.c. EY had a stellar year and saw its fee income up €24.5 million . on or 17.3 per cent for its financial year to the end of June 2014. It should be noted the other Big Four firms report at calendar year end so EY's figures are more recent, and show the recent strong growth in Ireland's economy to a greater degree than its peers.

Aside from the Big Four, the top accountancy sector in Ireland has a second tier group of four firms - Grant Thornton, BDO, RMS Farrell Grant Sparks, and Mazars, the smallest of which, (Mazars), had a fee income of €28.5 million compared with the leading Mid Table Firm Baker Tilly Ryan Glennon, with €15.6 million.

These ‘Big Eight’ who account for €1,131.3 million of the €1,231.4 million total of the top twenty or 91.9 per cent saw their fee incomes rise by €100.2m or 8.8 per cent. The Big Eight firms have also been the big movers in the survey with many of the double digit growers coming from this group. Amongst them, Grant Thornton have been the big winner with fee income up 24.1 per cent, seeing the firm's fee income break €100 million for the first time.
Leading the Mid Five firms is Baker Tilly Ryan Glennon who have posted a new record fee income for the 2014 survey of €15.6m, up 4 per cent on last year's survey. Moore Stephens recorded a 5 per cent increase to reach €14.7 million, while IFAC saw growth of 4 per cent. Crowe Horwath and Russell Brennan Keane saw marginal fee income growth of 0.7 per cent and 1.1 per cent respectively.

Leading the Lower Seven firms in fee income growth terms, and the top 20 firms overall, was Smith & Williamson, led by managing partner Paul Wyse, who grew by a massive 43.1 per cent recovering lost ground following a big fall in fee income in last year's survey.

Productivity at the majority of firms has fallen in this year's survey, with EY, KPMG and Grant Thornton the only firms to increase their income per staff member.

This reflects, by and large, the enthusiastic recruitment that firms across the board have engaged in over the past year. Our measurement, seen in the table below, breaks down company fee income per head of staff member. A number of firms have strongly expanded their headcounts with Mazars (up 26%) and Grant Thornton (up 24%) leading the percentage increases. EY top the efficiency table this year with an average income of €140,440 per staff member. EY’s 12.5 per cent increase on last year's figure was the largest increase of any firm, with KPMG, in second place recording a 7.5 per cent increase, to €136,364 per staff member. Despite increasing headcount by 24 per cent Grant Thornton was still able to record an increase of 4.6 per cent in income per staff member to €98,185. Mazars saw the biggest drop on this metric, down 19.4 per cent, as a result of increasing its workforce to 278, up from 220 the year before. Like-for-like figures show that employment increased by 7.5% across the firms and highlights the optimism for the business and economic outlook held by a number of the managing partners.

'With stronger than expected economic growth we would expect an increase in demand for our services across all areas of our business in 2014/15 as more and more companies return to investment and growth mode after many years of retrenchment’, said Mark Kennedy, joint senior partner at Mazars who also said the firm plans to continue to aggressively expand its business. 'We are currently recruiting for 50 new jobs throughout all areas of our business. The creation of these new jobs underlines our commitment to growing our business in Ireland and is a vote of confidence in the recovery currently underway.'

BDO's managing partner, Michael Costello, said 'BDO have shown growth for the last few years, however significantly, we are now seeing growth starting to come from the more transaction-driven areas of the firm. We would expect this trend of growth to continue into the future and would be hopeful that the level will accelerate further, delivering between 7 to 10 % growth during our next financial year.'

Brendan Jennings, Deloitte’s managing partner said 'on an all-Ireland basis, fee income has grown by 4.6%, compared to the previous year. In terms of future growth, we are confident for growth in 2014/2015, and believe that our strong consulting and advisory offering can lead to opportunities as clients increasingly need and look to exploit changes in demographics, technology advancements and analytics, and opportunities in emerging markets. These, coupled with our competencies in Audit, Tax and Corporate Finance leave us well placed to serve clients as they look to grow their business in a recovering global marketplace, while also ensuring efficiencies within their business and compliance with statutory obligations.'

Advisory business is also highlighted as a strong growth area by Shaun Murphy, managing partner at KPMG. 'Our overall revenue was up year on year by 13% with growth in our Advisory practice particularly strong in the year. This has been driven by a combination of a stronger economy and our preeminent position in restructuring,' he said.

PwC's fee income broke back above €300 million and managing partner Ronan Murphy said, 'The small increase in our fees this year is reflective of our recovering economy, continued investment by the FDI community in Ireland and, more recently also, greater confidence amongst the SME sector.' He added that the firm has 'seen solid performance across all lines of services as we continue to support our clients to grow their businesses. Our consulting practice, in particular, has shown strong growth as we continue to expand our services to meet the needs of the digital age including technology-enabled products, data and data analytics and cybersecurity. Our tax practice has experienced good growth for both tax compliance and tax advisory work. Demand for tax services from the foreign direct investment community remains very strong. On the assurance side, reflective of a more challenging regulatory environment, demand for regulatory compliance and risk services continues to expand. Looking forward, we expect modest growth to continue in line with our economic recovery.'
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