There has been an increaase in the number of accountancy and audit firms going out of business this year compared to last according to analysis from Syscap report Harris & Co accountants Northampton who specialise in providing accountancy services to small and medium sized local businesses.
Syscap calculates that 103 firms in the accountancy and auditing sector went into administration this year, or 2.5% of the total number of UK firms. The number of bankruptcies was up from 73 last year.
While RSM Tenon was the most high profile failure, the firm says profitability and cashflow are coming under increasing pressure in many firms and particularly smaller practices.
Philip White, Syscap chief executive, said: ‘High street accountancy practices found that some of their smaller clients tried to do without any professional advice as a cost cutting measure. Even larger accountancy firms have found it hard to keep the rates they charge for work moving up in line with inflation.’
White cited other factors which had impacted larger firms including the collapse in M&A and corporate finance work; closer scrutiny of tax planning schemes; and a widening of the exemptions for businesses which do not need an annual audit. While insolvency work increased to cover some of the gap, that is now also showing signs of slowing.
As a result, some firms are finding it harder to maintain the cashflow to cover business costs such as VAT or partnership tax bills or Professional Indemnity Insurance (PII) fees.