Rankings report – FRANCE
Dearth of qualified accountants creates recruitment crisis
France's strong economic recovery is leading to demand for a wide range of services from accounting firms. It is also creating a recruitment crisis as firms struggle to find the right people to shoulder the workload, with some being forced to hire people without an accounting background. Che Golden reports
ong-term changes to regulations are now having an effect in France, forcing a shakeup in auditing services for smaller firms, while bigger firms are being forced to move on from long relationships.
Couple this with many in the SME market struggling to adjust to the new normal after nearly 18 months of generous state support during Covid, and it is clear that the French accounting industry has a lot to juggle.
“The difficulty in recruiting is one that is facing many companies in France,” says Olivier Lelong, president of Aca Nexia. “But I think it is an even bigger problem in accounting and auditing due to the disaffection of young graduates for our professions. This is also reflected in an upward trend in remuneration.”
Younger staff members seem to be the ones that are the hardest to retain. Julien Benatar, chief operating officer at Crowe France, has observed a significant and a steady turnover of staff members between 25 and 40 years old.
“Every firm in the market faces the defection of this category of people, and this makes it very difficult to maintain a healthy age pyramid,” he says.
Pascal Ferron, vice-president, Allinial member firm Walter France
While there have been no significant regulatory changes in the last 12 months, two older regulation changes are really beginning to impact the auditing market
The le Pacte law (2019) has limited the audit activities in small businesses, while the European audit reform obliges listed compagnies to change their audit firm after 24 years with the same auditors.
“This means that a lot of small accounting firms are leaving their audit activities,” says Lelong. “The first effects of the application of the European audit reform are expected in the coming months and years. In France, second tiers audit networks are positioned to benefit from mandatory rotation to become significant actors in the audit of listed companies. Grant Thornton is the most important second-tier network. BDO, Nexia and RSM are also developing their audit activities and emerging in the French market of listed companies audit.”
While the Le Pacte law is causing smaller companies to abandon their auditing activities, it was designed to promote growth and simplify business processes in the SME sector. The benefit for the accounting industry is that it allows chartered accountants to extend their reach, making up for the loss of auditing revenue, according to Pascal Ferron, vice-president at Allinial member firm Walter France.
“We can now offer recovery and payment of sums due by means of cash transfer orders, the possibility to carry out tasks with an environmental purpose – such as carbon assessment or eco-certificates – or a financial or digital purpose, and the possibility to charge success fees,” he says.
“These new missions make up for the loss of market shares in auditing since the statutory audit thresholds have been raised. We must bear in mind that, in France, most auditors are also chartered accountants.”
Emmanuel Magnier, partner, Ecovis France
The French government is also being proactive in making sure all business sectors are supported as the country emerges from the pandemic – it seems to recognise that GDP growth alone is not going to be enough to keep every firm healthy.
There have been several incentives actions for business, such as the establishment of loans and various financial aid, the adjustment of social and fiscal debt averaging, says Emmanuel Magnier, partner at Ecovis France.
“We have also had financial support for hiring young people to facilitate resumption of activity. There have been purchasing power measures to consolidate the return to growth, as well as corporate tax reduction.”
Lelong points to the strong growth in transaction services activities since September 2020 as an indicator of how healthy French businesses are overall. Restructuring activities are also decreasing, linked to the low level of business failures.
During the Covid pandemics, the French state has supported businesses, particularly for social issues. “The chartered accountants had to administer state subsidies, short-time unemployment, and PGE loans, which are loans guaranteed by the state,” says Ferron.
"The number of clients asking for support on these subjects has grown exponentially. Accounting firms made huge efforts in the field of communication to provide their clients with real-time information on the evolution of regulations, which were adapted at a frantic pace.”
While state support has been very good during the pandemic, there is now going to be a transitory phase for many French firms as they go on without it, another opportunity for French accountancy firms.
“We have needed to support clients through post Covid challenges, especially with regards to starting again or restarting businesses and how to live without the help of the French state” says Stéphane Loubières, partner at FCN, an MGI Worldwide member firm.
Stéphane Loubières, partner, FCN, an MGI Worldwide member firm
As clients refocus on their core activities, they are increasingly outsourcing administrative functions to their accountants.
“We are being asked to take on everything from bookkeeping, to administrative management of staff,” said Michel Deudon, partner at Groupe Laviale, an MSI Global Alliance firm.
“The growing complexity of the economic, legal, technical and societal environment for companies and managers (the high frequency of regulatory changes, particularly in terms of taxation, company law, social legislation, personal data protection) prompts companies to outsource in those areas. Clients now partner with us to integrate the changes into their business plan.
Jean-Marie Vandergucht, managing partner at PrimeGlobal member firm Fiteco, says high demand from clients for consulting and assistance, puts the firm in good financial health, but the pressure upon fees must be balanced according to the industry involved. “The most touched industries are restaurants, hotels, entertainment, but they also benefited from many government aids,” he says.
For Crowe France, a new category of services has strengthened the firm's offers in the past few months and many of them have an impact on not only profitability but also on the range of future business it can pitch for - advisory, risk consulting and administrative support, for example.
“Since the pandemic, along with other accountancy firms we have hosted services such as global mobility services, recruitment and IT,” says Benetar. “Many professionals have turned to digitalisation of their services to meet the needs of their clients.”
Jean-Marie Vandergucht, managing partner, PrimeGlobal member firm Fiteco
The firms which proved able to accompany their clients during the pandemics have benefited from their recommendations and won new clients, says Ferron.
“In France, there is a very strong economic recovery: 3% growth of GDP for the third quarter of 2021 and a global estimation of more than 6% for 2021 after only 0.2% growth over the first two quarters,” he says.
“As a result, businesses express new needs. This is an opportunity for accounting firms to carry out added value missions, notably in terms of strategy. Fees are negotiated for accounting but they are much less so for consulting assignments. The problem for French accounting firms is to find members of staff able to carry out these missions. As the market is stretched, some firms are beginning to hire staff coming from other fields of activity with no accountancy background.”
Unlike many of the other country reports that IAB has published post-Covid, merger and acquisition activity in France has not been stifled. Magnier says the accounting and audit market has strongly consolidated for several years to give rise to many networks and that continued over the last 18 months. Ecovis is working on the development of new diagnostic services for companies, such as IT process, internal procedures, social accounting and tax regulations.
While it is currently developing everything in-house, Magnier says the company is actively looking for M&A targets to help it grow quicker.
Michel Deudon, partner, Groupe Laviale, an MSI Global Alliance firm
One of the most significant transactions of the year was the spin-off of a PWC activity in France: PWC Small Business Services. It became independent and joined the PKF network, becoming the sole representative in France. As a result, one of the former representatives of PKF in France joined Nexia International, bumping its turnover to €130m ($148m).
Vandergucht says he has seen many requests for firm purchases, and firm mergers. There are a number of factors driving this, such as retirements, the digitalisation of processes, and change in the tools and again, the difficulties to recruit and keep the team members is leading to a lot of churn.
Loubières predicts that most of the M&A activity in France over the coming year will be amongst the smaller firms. “It is harder and harder for small firms to stay attractive for auditors. That is why some firms decide to see how they can work together either through developing a network, merging, or developing a specialisation,” he says.
However, while the economic forecast for France is good, it seems that too much of a good thing, is making the accountancy industry a little nervous. “While the forecasts for the next 12 months seem good, we must fear a downturn after the recovery we have seen,” says Vandergucht. “We also have the presidential election in April 2022, which is going to create some economic uncertainty in the short term.”
Benetar agrees. “Due to the client's pressure since the beginning of the pandemic, it seems that the firms are trying to consolidate their position and organisation but there are definitely new strategic challenges coming up for everyone. It is also too soon to foresee a particular leverage that could carry the growth of the market on a long-term basis.”