Accountancy Outpaces Legal Profession

accountancy over legal

If we were to judge the state of the economy by the growth of accountancy firms then the UK appears to be doing very well.

The UK is one of the most “financialised” economies in the world – that is to say our financial sector is responsible for a very significant chunk of GDP (8-10% over the last few years). London is tied with New York as the world’s largest financial sector. Since the ‘big bang’ in the City of London in 1986 and the decline in manufacturing that was precipitated by Thatcher, we’ve come to rely heavily on accountancy firms, investment banks, insurance firms and the exchanges. That reliance has been criticized since 2008, but it would be reasonable to say that no modern economy cannot function without a healthy financial sector, which includes accountancy firms.

So, growth is an encouraging thing. The number of new accountancy firms is growing at its fastest rate since the recession. Not only that, but this growth is five times faster than new legal startups. Once could speculate that this is down to the prominence of accounting matters, like tax avoidance, in the media over the last few years. Certainly, more students than ever before are studying accountancy.

At the moment there are 44,025 accountancy firms in the UK, according to analysis from SJD Accountancy. This is a 6.2% increase on the previous year, when there were 41,455, and a 15.5% increase since 2008, when the amount was 31,115.

In contrast, the number of law firms has increased by just 1.3% in the past year.

Talking to Economia, Simon Curry, chief executive of SJD Accountancy commented on the findings: “Compared to other professional services, such as law, demand for accountants held up reasonably well during the recession and has picked up markedly since. In the past year the number of law firms has increased by just 1.3%, compared to 6.2% for accountancy businesses, so on that metric the accountancy sector is growing nearly five times faster than the legal sector.”

The increase in the number of firms is partly due to practitioners leaving larger firms during the recession as redundancies, slow pay growth and restricted promotion opportunities persuaded many accountants to “strike out on their own”.

Curry is convinced that this is the sign of a growing economy:

“While it is true that in bad times you still need an accountant, the profession clearly benefits from an uptick in economic activity. Accountants were focused on cost-cutting and reducing headcounts during the recession, but the emphasis is shifting so that accountants with strong resource planning and change management skills are increasingly in demand as businesses grow.”

Accountancy jobs have also seen an increase since the financial crisis, growing from 157,000 roles in 2009 to 177,000 at the end of 2014, a 12.7% rise. The number of jobs in other financial services sectors (bankers, insurers and asset managers) has suffered a different fate, declining from 1,178,000 in 2009 to 986,000 by December 2014, a fall of 16%.