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Research

Evolution of
mid-tier accountancy firms

ICAEW's latest research reveals the polarised reactions to private equity funding within the sector, as well as expectations for profit growth and shifts in services lines over the next three years.

What is shaping the mid-tier?

Chartered accountancy firms have long served as trusted advisors to businesses, but they also have their own unique set of challenges. This research enabled managing partners at mid-tier UK firms to share their thoughts on the key issues impacting the sector and what these mean for the future. The research highlights five key themes:
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Firm structure and operational model

The partnership model remains predominant, but private equity is beginning to have an impact.

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Leadership and culture

Firms see themselves as client-centric, but is there a disconnect between future client needs and leadership skills?

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Talent

Recruiting and retaining qualified staff is the top challenge facing mid-tier firms, but what can be done?

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Technology

Technology provides significant opportunity for the profession, but firms are cautious in their approach.

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Financial performance and service lines

Firms are diversifying service lines, and this presents opportunities and challenges.

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Unparalleled insight

We invited managing partners from more than 100 firms with 11 to 249 partners to participate in the research, and we received responses from 40%. Among the respondents were a range of firms: 40% had between 11 and 20 partners, and the remainder had more than 20 partners. This range of participation allowed us to gather insights into the trends and dynamics shaping mid-tier firms.

Mid-tier accountancy firms stand at a pivotal juncture, poised to capitalise on emerging opportunities and address evolving challenges. By embracing change, fostering strong leadership and leveraging technological innovation, firms can navigate the complexities of the current economic landscape and emerge as strategic partners to their clients.

As the profession continues to evolve, the demand for the expertise and professional services provided by chartered accountants remains robust, reaffirming the profession's role as a catalyst for positive change and sustainable growth in a dynamic global economy.

Firm structure and operational model

Firm structures are evolving rapidly, with growth through mergers and acquisitions (M&A) occurring for nearly half of firms in the recent past, and more than half looking to pursue this activity in the next three years. This ongoing activity means that firms counted in this tier are in a perpetual state of flux. M&A has been a popular mechanism to help many firms satisfy their ‘growth-led’ culture.

Some firms are embracing private equity investment, seeking capital and strategic partnerships to fuel growth and innovation. Other firms see an opportunity to distinguish themselves by remaining independent and growing organically. The emergence of private equity in the profession has polarised opinions, but it appears set to remain part of the range of structures operating in the mid-tier.

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Leadership and culture

Leadership continues to be a cornerstone of success in the accounting profession, with a collaborative and a client-centric approach emerging as important cultural identifiers to firms. Respondents were asked to name the most important three skill sets for their future leaders and were clear that being commercially astute and adaptable were key. These skills provide the agility that enables firms to navigate complex challenges and seize opportunities.

However, there appears to be a disconnect between predictions for client needs in the future and the skills thought to be valuable in leaders. Firms predict that clients will be requesting greater access to live data, more automation and AI solutions in the next three years, but just 14% selected 'IT skills and digital literacy' as one of the three most important skills for leaders.

Similarly, while close to one-quarter of the firms surveyed predicted greater demand for ESG services, no respondent selected 'ESG knowledge' as a top three skill for their future leadership. As demands from clients evolve, firms will need to consider how they adapt to meet these needs.

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Recruitment of qualified staff was identified as a top talent challenge for 67% of respondents, while recruitment of trainees was considered a challenge by 10%.

Talent

Talent is the top challenge currently facing the mid-tier, with attraction and retention of qualified staff being the largest concern, and recruitment of trainees a secondary issue.

The importance of future-proofing the skills of chartered accountants was recognised by firms, largely driven by changes in technology and the increasing breadth of work that they are likely to be required to perform.

Firms recognise that they must be an attractive place to work. Nearly one-third of firms described their culture as ‘caring’ and while firms indicate a shift to more time working onsite, the majority still see hybrid working as the norm in the future. Investments in technology, offshoring, and outsourcing initiatives can potentially help to address talent shortages and enhance operational efficiency.

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When asked to describe the key challenges facing their firm, 31% of respondents referenced introducing, understanding and keeping up with technology.

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