Following two years of double digit growth Grant Thornton UK has seen a slight slowdown in its financial results, reporting revenues of £512m in the year to 30 June 2014, up 9% compared to previous year.
Grant Thornton UK chief executive officer Scott Barnes told IAB this slowdown was due to the stagnant results of the firm’s tax practice, but that he the overall results of the firm remained strong non the less.
Grant Thornton UK audit practice grew by 4%, a slower rate compared to last year’s 9%. "Even though the economy is improving audit remains a mature market where there continues to be some price pressure and with the audit thresholds moving up it means that fewer businesses need to have to an audit," Barnes said. "So there is pressure at all ends in the audit market and it is not a big growth area for any of the firms frankly."
In the past year Grant Thornton UK has won a number of important audits such as Fullers, the brewer, Simple Health, the health insurer and Interserve the support services and construction company.
Barnes said he believes there will be an increased number of audit tenders in the next two to three years due to new regulations in the UK and Europe.
"It could be positive, it depends upon whether businesses look to extend the list of firms they are prepare to appoint," he said. "At the moment it is probably not percolating down to firms outside the big four but this will happen over the next 5 years."
In the past year the tax service line has been flat and Barnes said the main reasons for that were the environment around tax planning which has made corporate less inclined to engage in tax advisory work and the slowdown in the transaction market.
Advisory was the main driver behind Grant Thornton UK’s growth in the past financial year with the advisory practice growing by 15% year on year.
"Advisory has always been an important part of our business and it probably about half of our business nowadays," Barnes said.
He believes this trend will continue, and not just at Grant Thornton UK, but across the industry. "Most firms’ audit and tax practices are only going to grow if there is an improvement in the economy and more companies are being formed," he said. "It is a mature market whereas advisory is still very fragmented if you look at the statistics worldwide even the smaller firms have only a small market share."
Asked about his opinion on the increasing importance of advisory work in accounting firms’ revenues and how it goes against recent regulatory changes, he said regulators have recognised that advisory is an important part of firms’ businesses and are trying to ensure that firms are not selling too many advisory services to their audit clients.
"But at the end of the day you can sell advisory services to clients which are not audit clients and that is increasingly something that happens," he said. "If the auditors can’t provide the advisory services to their clients, those clients will look for other firms."
While the regulators are looking at the potential conflict of interests when auditors offer non-audit services, he continues, clients around the world will continue to want to buy advisory and consulting services from the larger firms.
Grant Thornton UK’s strategy was embedded in a document titled Ambition 2015 where the firm set itself the target to reach £500m landmark of revenue by 2015. "We have achieved our revenue target," Barnes said. "But that is just the headline, underneath that we set ourselves targets to improve our clients satisfaction scores, to improve employee engagement scores and a number of non-financial metrics."
While a lot of progress has been made he said a lot remained to be done. "We are literally as we speak just putting together a business plan for the period to 2018 and we will probably be announcing something on that sometime in 2015," he concluded.