James Parker, associate director at global recruitment consultancy Hydrogen Group writes of skills shortage within accounting firms due to years of paused investment
Accountancy firms are feeling the fallout from their under investment in graduate talent during the recession. As UK economic growth picks up, the commensurate demand for accountancy services across all business lines means this under investment is having a fundamental impact on the recruitment market.
Cut backs by the Big Four, and indeed other accountancy practices, in hiring and training graduates seemed a rational reaction to the extremes of the financial crisis. They felt that the fee income at the end of the training was not sufficient to cover the cost of keeping those they had hired. So the recruitment tap was turned off.
The impact of this means that many firms are experiencing skills shortages across all areas including some of the most main stream such as audit, forensics, tax and internal audit. Additionally, the huge increase in financial regulations over the last few years has led to a need for candidates, both in and out of practice, with specific regulatory experience in financial services. Again, good candidates have been in short supply for what are new and complex positions that require specialist knowledge of the new regulatory framework and in some cases international knowledge.
As the UK economy picks up, this shortage of skills is getting ever more apparent, since the recovery has brought with it increased corporate activity fuelling demand for accountants across all the major specialisms.
Mergers and acquisitions activity and increasing capital markets work, as more companies list on the public markets, are fuelling strong demand which cannot be easily met by existing talent pools.
This disconnection between supply and demand has already had an impact on where candidates are sourced. In the last year, we have seen the Big Four firms fill up to half their vacancies globally, almost entirely through their own international networks.
Furthermore, practices are now looking at external applicants, not just their own networks, in order to continue to meet demand. International talent is being drawn from countries such as Cyprus, where once an accountancy qualification is completed candidates are eligible to work in the UK. Singapore and Australia are also providing candidates to fill the gap.
The supply and demand argument would favour a wholesale increase in remuneration. However, wage rises are yet to be experienced. As well as the general trend of wage stagnation, wage rises among accountants specifically have been held back by bureaucratic and structural issues. Pay scales among the leading firms are fixed, and changing them involves a great deal of internal discussion, leading to a sclerotic process that hinders change.
Rather than increasing wages to attract and maintain staff, employers have been looking at other ways of keeping talent such as promoting the newly qualified early on to management positions. Firms are also gradually recognising the need for contracts that match candidates’ needs for a work/life balance.
Such measures might include granting requests for flexible working conditions that could include working at home or building in the need to accommodate child care arrangements.
In a recent survey completed by Hydrogen on over 6,000 newly qualified accountants, work/life balance was considered the third most important factor for accountants considering a career move – ranking just behind salary and career development.
Each of the Big Four now promote flexible working to varying degrees, recognising its importance to their work force and to the attraction and retention of high calibre staff.
For those entering the profession now, however, opportunities have never been greater, as firms are waking up to the skill shortages they face. This is reflected in the substantial increase in graduate vacancies for 2014.
Graduate recruitment in the accountancy profession is now at its highest level since 2007. This means that there have been more opportunities for this year’s university-leavers than at any time since 2007.
However, anyone expecting that pay rises will flow upwards, if firms are forced to hike graduate starting pay, will be disappointed.
Graduate starting salaries for 2015 at the UK’s leading graduate employers are expected to remain unchanged for an unprecedented fifth year.