The Italian accounting profession is beset by a series of challenges according to Johannes Guigard. The industry veteran tells Carolyn Canham about the glut of accountants, too many micro practices and stiff competition from other professions
The global financial crisis is affecting the accounting profession in many jurisdictions but Italy is feeling it worse than most. A survey of Italian firms by the International Accounting Bulletin in April this year found the economic downturn was affecting the revenue of firms.
The survey revealed market growth of just 3 percent, the worst result for Italian firms in at least five years. The growth was also the lowest among any markets the publication had surveyed over the previous 12 months and considerably less than the 14 percent increase in combined revenue reported in the 2007 Italy survey.
The profession has not been helped by the performance of Italy’s economy. The GDP contracted by 1 percent in 2008. The International Monetary Fund predicts a 5.1 percent contraction in 2009 and 0.1 percent contraction in 2010.
One factor that could be exacerbating the effects of this downturn on the profession is an oversupply of qualified accountants. Italy has more than 100,000 professional accountants in a population of 60 million.
In comparison, according to data from The Accountant, there are about 30,000 professional accountants in Germany, which has a population of 82 million; France has about 18,000 professional accountants and a population of 65 million.
The UK has a far higher concentration of professional accountants than Italy, let alone the other European countries, with a population of 62 million and more than 200,000 members of the five chartered accountant bodies (not counting those based overseas and those who are retired or honorary).
The combination of a glut of professionals and the recession means there is not enough work for accountants and industry veteran Johannes Guigard says competition is fierce.
Guigard is a member of the Milan chapter of Italy’s National Institute of Accountants (Consiglio Nazionale dei Dottori Commercialisti ed Esperti Contabili – CNDCEC). He is also a member of the European Financial Reporting Advisory Group SMP working group, chairs the Federation of European Accountants (Fédération des Experts Comptables Européens – FEE) company law task force and sits on the United Nations Conference on Trade and Development Intergovernmental Working Group on International Standards of Accounting and Reporting.
Guigard says the fierce competition is amplified by the fact that there are too many micro-practices.
“The practice is normally me and my wife, me and my brother, me and my son – that’s it,” he says. “There are just two of us plus maybe three to five people working for us. As you are mainly a boutique, when clients start to become fewer or start asking for fewer services, what can you do? Not much.”
It is a difficult problem to rectify, Guigard explains, as everyone wants to remain boutique practices.
On top of the challenge created by this inflexibility is the fierce competition from the Big Four, law firms and payroll service providers.
Guigard says the divide between the Big Four and the rest in Italy is more extreme than anywhere else in Europe.
According to International Accounting Bulletin data, the average annual revenue of Big Four firms in Italy is 10 times the revenue of the largest mid-tier firm, Mazars. In comparison, the average revenue of Big Four firms in Germany is six times that of the largest mid-tier firm, BDO; the average revenue of Big Four firms in France is less than three times more than the largest mid-tier firm, Mazars; and the average revenue of Big Four firms in the UK is five times that of the largest mid-tier firm, Grant Thornton.
There is also significant competition from law firms and payroll service providers. Guigard says there is a payroll service association and theoretically service providers need to be qualified, but it is difficult to set boundaries for what non-professionals can and can not do.
“We have non-qualified competition from people coming, for instance, from the public offices, people working in the receiver office for instance,” Guigard says. “So now [professional accountants] are suffering.”
Despite the challenges facing the profession, Guigard remains optimistic.
“I see that now the situation is a little bit different for everybody, but there is not a big crisis, people are not saying ‘we don’t know how to survive’. So after all the profession is still working well, it is well respected,” he says.
- Population: 60 million
- Labour force: 25 million
- Labour force by occupation:
- Services 65 percent, industry 31 percent, agriculture 4 percent
- GDP growth 2008: -1 percent
- GDP projected growth 2009: -5.1 percent
- Market value of publicly traded shares: $1.07 trillion
Source: CIA World Fact Book