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BDO, the world’s sixth-largest accounting firm, posted an 11 per cent rise in UK profits in the latest financial year to £88m, boosting pay per partner by more than a fifth to £454,000.
Revenues in BDO’s tax division rose 7 per cent to £135m, while revenues from its audit practice, which remains the largest part of the business, grew 5 per cent to £151m.
This helped boost underlying revenues by 6 per cent to £428m in the 12 months to the end of June.
Paul Eagland, BDO managing partner, said he was “pleasantly surprised” by the firm’s performance in the latest financial year given the uncertain business environment following Britain’s vote to leave the EU.
PwC, one of the “big four” accountancy firms, said in September that UK profits had been dented by a business slowdown since the Brexit vote, triggering an 8 per cent fall in profits per partner to £652,000.
Deloitte similarly said in August that profits in its UK business were flat year on year, which the firm attributed in part to the “uncertain market which has been impacted by Brexit”.
Mr Eagland said: “If you had asked me 18 months ago whether we would achieve this level of growth with the Brexit situation, I would have been quite nervous. However, that [growth] has been fuelled by clients just getting on and doing things, even though post-Brexit a number held back on investments and transactions.”
BDO initially cut its spending budget for 2017 in anticipation of a slowdown, but reversed that decision when clients decided to push ahead with plans, according to Mr Eagland. This enabled BDO to hire 953 staff in the latest financial year, up from its yearly average of about 700.
“We are really determined to continue to invest in people and be mature about the headlines we will see from Brexit,” Mr Eagland said. “There is always a temptation to say, ‘let’s freeze hiring while there is all of this uncertainty’, but we think that would be the wrong decision.”
The managing partner, who was elected to lead BDO’s UK business a year ago, added that an area of focus in the coming months would be attempting to win audit and non-audit contracts from FTSE 350 companies.
He said: “We are still only in phase one of this. It will take another three years for companies and accounting firms to appreciate what the change in regulation has meant and whether it has truly loosened things up.
“[But] we are getting lots of opportunities. We have very direct conversations with every big company out there. I don’t think there’s a lack of competition — the market is very dynamic and I think we could see new entrants.”
However, he warned that competition could be reduced if the UK accounting watchdog was too hard on auditors. The Financial Reporting Council was last month urged to increase the level of fines it can issue to “big four” firms to £10m or more in serious circumstances.
Mr Eagland said: “The FRC needs to think about the practicalities of imposing those fines. [For most UK firms], a £10m fine against profits [in the audit division] would be a really significant figure. If other parts of your business are more profitable, firms could start to disinvest in audit, which would be really dangerous.”