2024 – further volatility ahead
Francesca Lagerberg, CEO of Baker Tilly International, anticipates significant shifts within the accounting sphere in 2024, with notable disruptions related to private equity, the ongoing talent war, and the integration of artificial intelligence.
As we head into 2024, we expect modest revenue growth in most regions for major professional services firms led by North America and Asia Pacific, with Europe continuing to be the laggard due to macro-political and economic reasons. We also believe that although the words pandemic and COVID will feature less and less next year, there is no doubt the overall operating environment will remain volatile.
Although the debate about multidisciplinary vs audit only won’t be as prominent as this year, there will be plenty more ongoing discussions on managing risk and safeguarding audit, and we are likely to see more consolidation next year with alliances and mergers across the sector reinforcing the trend in 2023.
Private equity will continue to be very actively interested in accounting firms although less so in law firms and consultancies. And for the first time, Asia Pacific is coming to the party.
Both the increases in consolidation and external investors reflect the fact that, for the first time, Professional Services has become capital heavy rather than capital light. We all need cash to pay for technology; investing in AI, for instance, does not come cheap.
Regulation across the world will continue to intensify in 2024, partly driven by the need to respond to audit failures but also to ensure confidence in the sector. We may even finally see audit reform in the UK with a new government.
There are also some significant reporting reforms being introduced in the EU on 1 January with the CSRD. If our own research is anything to go by, companies are simply not prepared for the changes that are coming down the pipe.
The profession will no doubt explore new ways of working with AI, another major trend of 2023. We expect to see increasingly sophisticated automation. I’m personally very excited about its potential, but we’d like to see authorities, especially those in the UK, turn more attention to how to regulate the use of AI in audits. At the moment, it’s a free for all. By contrast, the EU is making some progress in this area.
We’d also like to see some of the learnings coming out of the massive investments made by the Big Four in AI being used for the benefit of the profession as a whole.
I do expect continuing discussions around flexible working and the return to the office, including conversations about the need for extensive and expensive real estate in the centre of major cities. That said, the accountancy profession is certainly more comfortable than other professional services and financial services around hybrid working. And expect to hear more, not least from me, about initiatives encouraging young people to enter the accountancy world.
We will also continue to see gaps in skills where the few can command top dollar, and there is a genuine war for talent – with say ESG or AI expertise – but we also anticipate further fall out from post pandemic over optimistic hiring in advisory. The latter is more of a problem for the Big Four than for the challenger firms. The uncertain economy will see a further lack of attrition among the larger firms and potentially more (targeted) layoffs as a result.
On the negative side, sadly, cyber security threats will continue to dominate the headlines in 2024 as they did in 2023, and all of us will need to maintain our vigilance.
And finally, there will be more than 70 elections in 2024 in countries that are home to around 4.2bn people—more than half of the global population. That offers both great potential for uncertainty but also great possibilities for change, and professional services firms really thrive on change.