The past fiscal year was one of the hardest for Spanish companies immersed in the economic crisis. Accounting firms say the period was defined by an ongoing search for efficiency through significant cost adjustments.
Two years since the onset of the global financial crisis, the accounting industry is still reeling from extreme fee pressure, which is the single biggest issue for audit practices. Another area that is suffering is transactions services as M&A activity is sparse amid the economic uncertainty.
The bright spots in Spain are tax and some niche advisory services, such as restructuring and due diligence. Foreign investors are running the rule over failing Spanish businesses and this is providing some opportunities for firms to help investors assess prospects.
Despite the gloom, the workforce grew marginally although headcounts varied from firm to firm. Hiring was largely strategic but the majority of firms have managed to retain current headcount levels. Firms, networks and associations surveyed in our report earned a total of €1.8bn in 2010, the result of 3% average growth. This is markedly better than Spain’s economy, which contracted by 0.47% in 2010 following a contraction of 3.7% in 2009.
The International Monetary Fund has predicted the Spanish GDP will grow by about 1% in 2011 and this is creating optimism among the accounting firms who are currently investing in service lines, staff training and improving internal processes.
Seventy percent of firms reported an increase in revenue but only three reported double-digit growth. Last year, double-digit growth was far more common.
Deloitte leads the pack
Deloitte is the market leader and reported a 5% revenue increase to €459m ($649m) in the year to 31 May 2010. It also has the largest workforce with 4,668 people across 20 offices.
“In the past fiscal year we had to make an enormous effort to provide solutions for our clients,” a Deloitte spokesperson explains.
“By giving our team’s greater flexibility in order to offer new types of services, reduce our overheads and motivate our professionals to work even harder and more efficiently.”
PwC also reported 5% growth to €429m, while Ernst & Young (E&Y) is the only Big Four firm to report a decrease in revenue of 6%, from €278m to €261m in the year to 31 June 2010.
Bucking the trend, PwC audit managing partner Manell Valls says it was the development of audit-related services that helped the firm to produce a modest increase in overall revenue.
From E&Y, there is a jump of €173m to the largest mid-tier firm, BDO, who reported 2% growth to €88.3m in the year to 31 August 2010. That BDO is nearly half the size of the smallest Big Four firm is unusual in a developed Western market.
Mid-tier network PKF International reported the largest growth of 707% from €2.8m to €22.6m in the year to 31 June 2010. The substantial growth is due to admission of an exclusive correspondent firm, Attest, which is in the process of becoming a full member firm.
AGN International member firm D[i]G Advocats had the largest drop in revenue of -13% to €1.7m in the year to 31 December 2010.