The provision of value-added services will provide a platform for growth for medium-size players, while smaller firms will capitalize on the growing need for niche services
Los Angeles, CA (PRWEB) November 08, 2011
The Accounting Services industry will continue to recover in 2012, driven largely by a rebound in the performance of major players, which were hit relatively hard by the economic crisis, according to IBISWorld, the nation’s largest publisher of industry research. In addition to their core auditing and corporate tax work, these firms derive a significant proportion of revenue from advisory work on major corporate deals, such as mergers and acquisitions and capital market activities, which slowed dramatically as financial markets collapsed. These activities will recover as the financial system stabilizes and investor confidence returns, driving demand for procyclical services of the major firms. Smaller firms will also experience growth as the small-business market improves and gains more profit. From 2011 to 2012, IBISWorld projects that industry revenue will increase to $69.9 billion.
The subprime mortgage crisis and subsequent recession slowed growth for the Accounting Services industry. In the five years to 2011, IBISWorld estimates that revenue will increase at an average annual rate of 0.9% to total $67.4 billion. Slow industry growth has occurred because of a fall in demand for deal-related services, such as mergers and acquisitions and initial public offerings, which typically decline in times of financial instability and low business confidence.
However, the Accounting industry has not been at a total loss, particularly for operators involved in bankruptcies and corporate restructuring. The provision of these services has somewhat mitigated declines for the Accounting services industry because many corporate clients turn to accounting firms for assistance when faced with financial problems. Unfortunately for accounting firms, business bankruptcies have come back to haunt some industry players. Firms can no longer generate revenue from bankrupt clients, and countercyclical work has slowed as the economy continues to recover. While many operators have been forced to reduce their rates in order to remain competitive, an increase in demand during 2011 is expected to cause industry revenue to increase 1.9% from 2010.
The recent reduction in hourly fees has reduced industry revenue and profit margins. Firms have taken action to maintain their margins by implementing salary freezes and reducing employee head count. Some operators have not been so lucky, including nonemployers, who do not have as many costs to cut. Poor operating conditions have caused the number of industry firms to decline in the five years to 2011.
According to IBISWorld analyst, Kevin Culbert, in the five years to 2016, revenue is forecast to increase at an annual average of 2.6% to total $76.8 billion. “The provision of value-added services will provide a platform for growth for medium-size players, while smaller firms will capitalize on the growing need for niche services,” says Culbert. “While profit will improve from current levels, pricing competition will limit margins to below pre-recession levels.”
For more information, download the full report from IBISWorld on the Accounting Services Industry
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