The UK faced a net loss of nearly 490 firms between 2017 and 2019, according to the latest research from cash flow group Float.
In the same period, the accounting industry saw new businesses “tail off” as the industry saw an increased market consolidation, with larger groups acquiring small and mid-size firms.
According to Float, these acquisitions contributed to the net reduction in firms, despite the fact the number of accounting and auditing firms in the UK grew by 7,270 between 2011 and 2017.
Marking an average net growth of 1,212 extra firms per year, this initial industry boom reflected the “rude health” of the industry and “ease” with which accountants could start and grow their own firm.
The digitisation of tax and cloud accounting software also contributed to this trend, according to the ‘Accounting for Change’ report.
Between 2017 and 2019, however, the number of smaller firms with a turnover of less than £100,000 decreased by 5.4% to 19,890.
Meanwhile, the number of accounting firms with a turnover of more than £100,000 increased by 4.3% to 15,630. Float said that these numbers were “driven by the consolidation and growth of smaller firms, as well as the continued profitability of larger firms”.
Float’s report also found that London had the highest net growth of accounting and auditing enterprises in the last decade, with a rise of 2,405 businesses. However, it also lost the most amount of firms since 2017, with a total net loss of 325 businesses in two years.
The South East and East of England grew by 850 and 615 businesses respectively since 2011, while Northern Ireland and the North East saw the least amount of growth, with a rise of 70 firms and 85 firms, respectively.
Colin Hewitt, Float founder and CEO, said: “The accounting, bookkeeping and auditing professions have transformed radically since 2010.
“These have been traditionally cautious industries when it comes to technology adoption, but that has changed profoundly this decade.”
He added: “The introduction of Making Tax Digital, the rise of cloud accounting apps and the embrace of technology to automate basic compliance functions have all helped modernise the profession and help provide a better/more proactive service to clients.
“Progressive firms now prioritise and cultivate innovation from their staff in a manner unheard of ten years ago.”