While the recovery in the UK economy has obvious benefits for job-seekers, the shortage of skilled professionals makes accountancy firms fear they cannot keep pace with demand, according to research.

While the recovery in the UK economy has obvious benefits for job-seekers, the shortage of skilled professionals makes accountancy firms fear they cannot keep pace with demand, according to research.

Bloomsbury Research, the tax and accounting information group, recently surveyed the accountancy industry and found that 61 per cent of firms said lack of capacity to meet rising demand posed a high or medium risk to profitable growth, a rise from 46 per cent from last year.

Accountancy firms provide services that will include the kind of private client work relevant to the wealth management sector. As regulatory and compliance rules proliferate, demands for particular forms of expertise also mount.

The survey found that firms are increasingly worried by growing wage bills, with firms forced to raise salaries to retain staff. Some 36 per cent of accountancy businesses now rate this as a risk, compared to just 23 per cent the year before.

“Ensuring that accountancy firms are prepared for the anticipated uptick in workload is crucial if they are to capitalise on the growth opportunities amid the recovery and maximise their profits. At the same time, they are aware that competition for talented staff will quickly heat up and are recognising that they may have to pre-empt that with higher pay rises sooner rather than later,” Martin Casimir, managing director at Bloomsbury Professional, said.

“If those pay rises kick in before the firm’s own workload increases or before fee rates improve, then it will certainly hurt profitability,” he continued.

The possibility of cost over-runs on fixed fee work is now seen as the biggest threat to profitability. Over-runs on fixed fee work were rated as a risk by 69% of firms this year, up from 66 per cnt the previous year.

However, fears over downward pressure on fees are diminishing. Competition between firms over fees was rated as a threat by 73 per cent of firms last year, down to 58 per cent this year, and half see pressure from clients to reduce fees as a risk, down from 69 per cent.

“Having been forced to work on that basis when the recession was at its worst, firms are now finding it difficult to go back to their traditional charging models. Fixed-fee arrangements are proving to be very popular with clients who like the certainty of knowing how much a particular piece of work is going to end up costing,” Casimir said.