This year we canvassed the views of 23 firms of a range of sizes from across England, Scotland and Wales. Browse through our key findings below and download the full report for a deeper dive into the detail and key questions we believe accountancy firms need to ask about some of the issues raised in the report.

David Weaver, our Head of Professional & Business Services says: “It’s encouraging that the accountancy sector has exhibited such remarkable resilience with the vast majority of firms having a strong sense of optimism about the future. Many of the firms we surveyed demonstrated strong growth in profitability despite ongoing challenges, most notably persistently high inflation.”

With inflation hitting its highest level in around four decades during the financial year ending March 2023, accounting firms had to increase their incomes significantly just to keep up with rising people costs and higher overheads.

A common measure of fee income for accountancy firms is fees per equity partner. Median fees per equity partner in our survey were £901,000 – 13% higher than the median of £798,000 in our 2022 survey. This looks impressive on the face of it, but we need to consider that cumulative inflation in the UK between 2021 and 2023 was in the region of 17%.

Other measures of fee income such as fees per fee earner and total fee income painted a similar picture of fees struggling to keep up with inflation.

Things look a lot better from a profit perspective. Median profits per equity partner – the most widely reported measure of profitability for accounting firms – hit £253,000 in this year’s survey, 31% higher than in our previous study.

As you’ll see in the full report, our analysis suggests this is more down to improvements in people costs and the size of the business than the mix between the number of owners and employees.

Like all businesses, accounting firms need enough cash to deal with paying staff, partner drawings and operational running costs. One of the big problems for the industry is how long it takes to turn chargeable hours into cash.

Time that’s been taken on a job but that hasn’t been billed yet is called work in progress (WIP), and time that’s been billed but is still unpaid is referred to as debtors. Instead of looking at WIP and debtors in monetary terms, it’s more common to consider WIP days and debtor days.

Our survey found that WIP days for large accountancy firms shot up from 33 days in 2023 to 41 days in 2024, whereas small firms were more efficient, seeing their WIP days fall from 32 days to 26 days.

The reverse was the case for debtor days – the median level for small firms increased from 55 days in our 2022 survey to 66 days, whereas it fell from 71 days to 65 days for large companies.

Overall, the median total lock-up days (the time taken to turn fee earner time recorded into cash) fell from 114 days in our last survey to 105 days this time.

This is still a lengthy period, so firms need to think hard about the commercial terms they agree with their clients and other ways to reduce the lock-up period. And if firms could cut down their working capital requirements, they would need less capital from partners and less external finance.

We also asked the firms we surveyed about their future plans. Let’s look at the findings:

Two sides to the M&A coin

Only 17% of firms said it was likely that they’d be looking to merge with other firms or acquire teams, with 52% saying it was unlikely.

However, 83% said they’d been approached by consolidators over the past year, and this looks set to be a key theme over the coming years.

Growth in income and headcount

74% of firms expected their income to increase by up to 10% over the coming year, while 22% forecast it to increase by 10–20%.

Meanwhile, 65% expect their firms’ headcount to increase by 5%, and 21% by more than 10%.

Working arrangements

The pandemic may be well behind us, but it’s had a long-lasting impact on working arrangements.

Around 30% of respondents reported that their employees generally come to the office every day, 13% that they work from home one day a week, and 57% that they can work from home for two or more days per week.

Despite this increase in home working, 32% of firms expect to increase their office space over the next five years and only 9% expect it to decline. The remaining 59% anticipate no change.

Our Future Fit 2024 research gives UK business leaders the data and insight to seize more opportunities and thrive in the face of disruption.

Based on a survey of 1,000 UK businesses operating across 10 sectors, we’ve identified Future Fit businesses as those that outperform their peers in four key areas: sustainability, supply chains, talent, and technology.

Let’s run through what we think are the biggest issues for accountancy firms looking to grow or innovate over the coming years, because the prize for those that do could be significant:

Attracting and retaining talent

We asked the firms about the level of priority they place on DE&I in their business. Overall, 87% of firms saw it as a moderate or important issue.

We then turned our attention to the gender mix, finding that even though for 43% of our respondents more than 50% of their qualified fee earners were female, no firm reported that more than 50% of its equity owners were female, and 30% reported that under 10% were female.

Attracting and retaining talent is the biggest challenge facing firms against a backdrop of fierce competition for talent. Firms need to provide younger recruits with scope to grow their career and more experienced hires with flexibility, including in terms of working arrangements.

Coping with hybrid working

Companies need to make sure there are enough people in the office to help develop their younger workers. Making the office an attractive place to work will be particularly important in this respect.

IT investments

This is a hot topic for most professional service firms – not just accountants – so we asked the firms which areas of IT they were likely to invest most in.

At 43%, general business management systems were the most common focus area from an IT investment perspective, with other areas receiving roughly equal shares of the remaining responses.

Interestingly, only 10% of respondents said investing in AI was their biggest priority, even though there’s been a huge amount of discussion within the industry about the potential impact of this technology on the service that accountants provide their clients.

• There’s a pressing need for accountancy firms to invest in their systems, AI and cybersecurity, but costs are increasing. Getting their spending decisions right is crucial.

ESG and DE&I

We also asked them how much importance they place on ESG issues: 41% stated it was a moderate priority and 36% one of their stronger priorities.

• It might not be their highest priority, but there’s evidence to suggest that these issues are becoming increasingly important to both new recruits and clients. Firms need to have a clear strategy, values, and evidence of the actions they’ve taken in these areas to satisfy their stakeholders.

Discover more ideas around getting future-ready.