Accountants are as much in demand now as ever, and the foreseeable future shows no sign of this changing. By JASON BAKER of IBISWorld.
By Jason Baker
Accountants are enjoying good times. More rules and red tape, combined with strong economic conditions and corporate Australia’s appetite for mergers, acquisitions and private equity deals have spelt strong growth for the sector: 5.6% in 2006-07. And the growth is predicted to continue for the next five years.
While the Big Four firms still dominate accountancy, 11,000 smaller firms make up almost 60% of the industry’s $10.9 billion revenue.
More complex tax legislation, changes to superannuation laws and increased investment have all benefited the industry. The international standardisation of accounts, increasing global and Australian audit standards and increasing mergers, acquisitions, capital raisings, private equity deals, government asset sales and float activity have all fuelled its growth.
Corporations are the most lucrative source of business, providing 55% of revenue; government administration makes up 20%. Households still only account for 25% of the industry income, despite the need for personal advice and accounting services.
IBISWorld predicts revenue growth to continue at a relatively strong 5.6% this financial year as ever-increasing requirements for higher and legally enforceable auditing standards. The relatively recent introduction by the Federal Government of WorkChoices and choice of superannuation fund has affected most businesses, and will generate more work.
Strong forecast economic performance is expected to offer further growth. Activity by private equity funds is expected to remain strong, along with interest in investment in China.
Overall, it is expected that the middle-tier firms will become stronger, in terms of their total industry revenue share and growth, with many now challenging the supremacy of the Big Four.
For the same reasons, the industry will grow strongly over the next four years to 2011-12, but with some slower growth in 2009-10 due to a forecast slower economic growth for the period, which will affect the demand for services and slow mergers and acquisitions and IPO activity, along with most other services.
Concern about conflicts of interest between accounting/auditing and other services provided to clients has seen several firms sell off some of their service divisions. The demerging of accounting and auditing functions from insolvency, consulting, and legal services led to a fall in industry revenue around 2002 as revenue was transferred to other industries, but accountancy has since recovered.
The demerging of the big firms has encouraged mergers and acquisitions by medium and small firms for bigger revenue and profits, to challenge the Big Four and fill the vacuum left at the top.
With the industry still very much in a growth phase of its lifecycle, there is plenty of opportunity for players of all sizes to find their niche and make the numbers count over the next five years.
IBISWorld supplies business information databases, including industry reports, company reports and business indicator reports. www.ibisworld.com.au
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