Rankings Report: the Nordics

Consultancy boom in the Nordic region

The Nordic region came out of the pandemic relatively unscathed. Local accounting firms now have to ramp up their offerings in consultancy and be ready for the stormy global economy heading their way. Che Golden reports


or the Nordic region, bad news is translating into good news for local accounting firms. A troubled global economy and supply chain issues have led to a boom in consultancy work. Despite facing staff shortages, fees are climbing as customer demand is so high. M&A activity is picking up as bigger firms divest themselves of accounting services and venture capitalists are looking for investments in accounting. The recent adoption of ISA 315 is set to drive fees even further, but it may prove a hard sell to clients and accountants alike.

The general consensus amongst Swedish accounting firms is that the pandemic has not affected the industry negatively to any great extent, with many accountants experiencing an increase in customer demand. A large part of the government support offered to companies during the pandemic has been conditional on an opinion from an auditor, which led to a mini boom in demand for auditing services.

Coming out of the pandemic, the troubled global economy has increased consultancy work related to going concern, financing, liquidity, and bankruptcy. The problems with supply disruptions due to continued pandemic-related shutdowns in China and the war in Ukraine has also led to further demand for consultancy. This, combined with inflation and more expensive loans, increased costs of fuel, gas and energy has put a strain on many companies that now ask for support. However, inflation has also made businesses aware of increased prices that might have a positive effect on fee pressure.

“Set aside the pandemic, external factors such as digitalisation, artificial intelligence and an increased focus on sustainable development have meant that companies in the industry now demand a wider range of skills,” said Erika Hed, CEO of Finnhammars Revisionsbyrå, a Kreston member firm. “The profession continues to see large departures away from the profession combined with an increased need for auditing which is why the demand for accountants may be difficult to satisfy in the future.”

She also sees cyber security becoming a huge issue for Sweden in particular. “Automation and artificial intelligence is constantly growing and affecting the industry,” she said. “The cyber threat in Sweden has increased because of Russia’s invasion of Ukraine and Sweden’s decision to apply for NATO membership. It highlights how important it is to continue to strengthen the ability to prevent, detect and manage cyber threats against Sweden.”

Erika Hed
CEO of Finnhammars Revisionsbyrå, a Kreston member firm

The Nordic area seems to be of growing interest to companies abroad, according to Caisa Westin, partner at Revideco AB, an MGI Worldwide member firm. Entrepreneurs are increasingly coming to her firm for advice and consultancy services are on the up.

“The Nordic area, is experiencing quite a lot of M&A activity, especially in the accounting sector,” she said. “The big audit firms are narrowing down their range of services and therefore selling out the accounting service, mainly to other bigger accounting firms.” Hed has also noted an increase in venture capitalists entering the accounting market where bookkeeping agencies have been acquired by both national and international companies.

Caisa Westin
Partner at Revideco AB, an MGI Worldwide member firm

The Swedish government did have concerns over the number of foreign investors in Sweden following the pandemic. This prompted the Swedish Government to take action in 2020 and introduce screening rules for foreign investments by amending the Swedish Security Protection Act ("Security Act", Säkerhetsskyddslagen). The Security Act requires that any transaction involving a Swedish entity operating security-sensitive activities or assets must be notified and receive approval from one of the Reviewing Authorities before completion.

Although Sweden still does not have a general FDI screening mechanism, the new security screening obligation enables the Swedish Government via the Reviewing Authorities to supervise and ultimately block investments that may pose a threat to national security. The Swedish Security Service ("SÄPO," Säkerhetspolisen) and the Swedish Armed Forces ("SAF," Försvarsmakten) are designated as the central coordinating authorities. The Security Act is supervised by a total of 13 authorities, each of them responsible for monitoring compliance with the Security Act and reviewing screening notifications within their own specific jurisdiction.

Similarly, in July 2021, Denmark passed a new act on screening of FDI, the ‘Investment Screening Act’. The Act is supplemented by three executive orders issued by the Ministry of Industry, Business and Financial Affairs, which provide clarifications on the scope of application and further definitions of the concept of particularly sensitive sectors and activities, application procedure and on confidentiality. The Investment Screening Act aims to prevent foreign direct investments and certain special economic agreements from posing a threat to national security or public order in Denmark (including Greenland and the Faroe Islands).

Just like their colleagues globally, the Nordic accounting industry is experiencing a skills shortage. “The accounting industry in Denmark is under pressure due to lots of employees having left the business segment,” said Per Jensen, international partner, at Revisionshuset Tal & Tanker, a Morison Global firm. “They have left for new jobs as controllers, CFOs etc. It’s not easy having them replaced, and it takes a while to re-educate young colleagues to fill their shoes. Fees are not under pressure, since everyone is short on staff, and because of inflation in general. In fact, I believe prices will increase by around 10% in next 12 months.”

The Danish accounting industry is holding steady, according to Jensen. “We have not seen demand spiking in any particular area,” he said. “Business is getting back to normal, post corona, and during the next couple of months we should have finalised all corona-related reports to the Danish Business Agency. There are no significant developments in the pipeline – I I think there will be small mergers, prices will increase and the fight for staff will be ongoing. Climate reporting will be an interesting new area for us to explore but in the short term, Danish companies will have to continue working with digitalisation of their bookkeeping.”

Dennis Herholdt Rasmussen, director at Mazars Denmark, has seen service lines such as tax and FAS remain steady, but he is encouraged by what he sees as an uptick in business across the board. “Transactions seems to be getting more active, compared to the summer,” he said. “A similar activity on the demand side is expected for the next twelve months, off-set by any potential impact of the current economical environment.”

ESG reporting is also an area that Westin feels Nordic accountants need to focus on if they are looking to evolve. “We believe that ESG will get even more focus from investors, which will lead to a demand for reporting and auditing, preferably for listed companies,” she said. “There will be a need for accountants and auditors to develop their skills in that area. When it comes to accounting the automation will continue to develop, and slowly attract more and more smaller companies. This will lead to a higher demand for the profession to become trusted advisors instead of bookkeepers.”

The Swedish Inspectorate of auditors (SIA) decided on new regulation on measures against money laundering and terrorist financing that came into effect on Jan 1st , 2022. The regulation is aimed at the accountancy profession to clarify the regulation on risk assessment and monitoring. Additionally, the new Whistleblower directive has been implemented and the new regulation regarding the EU Corporate sustainability Reporting Directive is now being investigated by the Swedish legislators. But one of the more controversial regulation adoptions is ISA 315, which is currently being implemented in Sweden and Denmark, and getting a bit of a mixed reception.

Hed pointed out that in Sweden the thresholds for statutory audit are significantly lower than the EU directive and all audits are performed according to the full set of ISAs. “Many of the accountants working with audits of LCEs consider the full ISAs too extensive and sometimes difficult to adapt in an appropriate way,” she said. Jensen believes it will have a huge impact on full scope audit. He believes this will have a lot of SMEs look into a lower degree of reporting on their annual report. Westin believes ISA 315 will drive fees upwards, and there will be a challenge in explaining the benefits for the clients.

Sweden's economy grew strongly in October, but a slowdown looks to be on the way as it grapples with soaring inflation and softening demand. Gross domestic product increased 0.7% in October from the previous month and 2.0% against the same month a year earlier, a preliminary estimate by the Statistics Office showed on Wednesday. Sweden's economy has been resilient so far this year, with gross domestic product expanding 2.5% in the third quarter compared to the year-earlier period. But the war in Ukraine and lingering effects from the pandemic have sent prices soaring, forcing the Riksbank to jack up interest rates. The central bank expects the economy to shrink 1.2% next year - a relatively mild recession.

Denmark is also experiencing a turbulent economy. It had a good third quarter of 2022; GDP posted a 0.5% seasonally adjusted quarter-on-quarter expansion. The result, which beat expectations of a 0.5% contraction, came in slightly below the prior quarter’s 0.9% growth. The reading came in above the Euro area’s 0.2% quarterly expansion.

Meanwhile, growth softened marginally to 3.6% on an annual basis from the second quarter’s 3.9% increase. However, inflation is at 10.0%, the highest since 1982, and confidence in the economy is low. A total of 331 companies filed for bankruptcy in Denmark in November, the highest number in 13 years, according to a new report published by SMVdanmark. SMVdanmark, which represents 18,000 small and medium-sized enterprises in the country, said that since the summer ‘businesses have been hit hard by high inflation, soaring energy bills and, not least, fears about the future of the economy.’