Decline in newly qualified accountants cause for concern in UK accounting industry

Since 2018, the number of firms and bookkeepers have increased, despite less qualified accountants joining the industry since 2016, according to news analysis from IRIS Software Group (IRIS).

IRIS software group - a service that provides software solutions to help business organisations manage HR and payroll process, is calling on businesses to consider which accountancy firms they work with in 2023.

According to their new analysis there has been a 40% increase in the small practises and bookkeepers, which has increased from around 55,0000 to nearly 77,000 since 2018.

Despite this increase, the percentage of students in the UK and Republic of Ireland( ROI) declined by 2.1% in 2019 to 2020, and 2.2% overall from 2016 to 2020 according to FRC Key Facts and Trends 2022 report. The percentage of qualified members in the UK and ROI increased by only 1.9% between 2019 and 2020.

Steve Cox, Head of Market Insights at IRIS, stated, "In 2018, we wanted to get a better 'feel' for the size of the accountancy profession. The Office of National Statistics is a great starting point but isn't an exhaustive data source as it doesn't include the number of owner-managed or sole trader businesses."

He continued saying, "Based upon the data available to us in 2018, we estimated the accountancy profession to be around 71,000 firms."

In 2018, IRIS had completed a forward-looking view of the industry's growth based on trends and future events. This predicted a 10% increase in the number of accounting firms, increasing from around 71,000 to 78,000 from 2018 to 2023.

Following the IRIS's initial view in 2018, there has been 94,000 accountancy firms in the UK with 636 new practises in the month of March 2021. IRIS predicts this growth has been driven by the increase in owner-managed firms and bookkeepers whose role has expanded beyond just managing records, but are also utilising technological solutions to do final accounts.

Cox further said the additional data source has positively expanded the scope of the analysis. However, "there is no denying the growth in the profession". He went on to commend the additional data source for providing useful explanation for some of the talent and skills shortages existing firms have been facing over recent years, "with talent they would previously have hired deciding to go it alone and setup their own firms."

The IRIS Head of Market Insights explained the concerning trend in new graduates entering businesses and not accountancy firms.

He said, "The discrepancy between the number of student and graduates affiliated with industry bodies and the boom in new smaller firms is of serious concern for the industry at large." Cox also warned that "firms will continue to face talent and skills shortages if there isn't an increasing future talent pool to resource the growing profession."

Cox advises business and owner managers in key areas when it comes to choosing new accountants in 2023.

He says, "Any firm that doesn't openly share their qualifications on their website is an immediate red flag. If they don't, ask why not."

Being a member of a recognised industry body like ACCA, ICAEW or the ICB for example are necessary to gain credibility.

He continues, "The final check should be price. If a firm's prices are significantly below the market average, alarm bells should be ringing.

Furthermore, the IRIS Head of Market Insights advises that while highly specialised firms can reduce their prices, this is not customary practise and to scrutinise cheap rates to avoid any problems further down the line.