Look east for accounting’s next big thing

The Anglo-dominated accounting industry could soon have a Chinese flavour.

The emergence of Chinese banks is well documented but soon it will be the country’s accounting firms that rise to global prominence.

China’s accounting firms are being forced to localise in a move designed to end foreign control. This will largely affect what is known in the industry as the ‘Big Four’ – PwC, Deloitte, Ernst & Young and KPMG – who are led and largely controlled by expatriates and foreign partners.

The Ministry of Finance (MoF) has just released rules requiring all accounting firms to localise by August. This means they must be led by local citizens and ensure the proportion of foreign partners does not exceed 40 per cent. By 2017, this drops to 20 per cent.

The rules are designed to place control of the largest firms into the hands of Chinese and ensure voting rights are dominated by locally-qualified accountants.

The ‘localisation’ of the Big Four has been widely anticipated and the timeline provided is more generous than many experts predicted.

It’s an important step in the rise of China’s accounting industry because the Big Four are the last great bastion of foreign-managed firms, with market-leader PwC approximately 3.5 times the size of China’s largest domestic firm.

Number Two

This year, China will eclipse the UK as the second largest accounting industry by headcount. In 2007, the UK’s leading 40 firms had 30,000 more accountants than China but in 2011 the difference was only 5,400, according to the International Accounting Bulletin, a publication that analyses accounting markets.

And, China’s workforce has grown by 166 per cent in the past five years compared with 113 per cent in the UK.

The Big Four and Grant Thornton are still bigger in the UK but their Chinese counterparts are catching up quickly. BDO, RSM International, Baker Tilly International, PKF International and Nexia International already have larger Chinese workforces.

Chinese ‘super firms’

The government’s plan for its accounting industry is to produce Chinese ‘super firms’ that can compete head-on with the PwCs and Deloittes of this world. These firms are to become ‘homegrown’ global advisers to Chinese companies expanding abroad.

To do this, the MoF has ‘encouraged’ large Chinese firms to aggressively grow via M&A with like-minded firms, which has led to a flurry of consolidation in the past three years.

The MoF is encouraging Chinese firms to partner with global ‘mid-tier’ accounting networks outside of the Big Four, such as BDO, Grant Thornton and RSM. The aim is that these global networks will help Chinese firms develop audit methodologies and international skills in accounting and auditing. In return, the networks gain a strong Chinese firm for the referral of work in and out of one of the most important economies.

This has led to China becoming one of the least concentrated accounting markets. If you take the largest 40 firms in China, the Big Four earn 59 per cent of market revenue. In the US, the Big Four earns 81 per cent and globally their share is 70 per cent.

It is conceivable that the next 10-20 years, the global accounting industry could revert back to a Big Five or Big Six, with a couple of Chinese-backed players.

The traditionally Anglo-dominated accounting industry could soon have a Chinese flavour.

Arvind Hickman is the  editor of the International Accounting Bulletin.

Photograph: Getty Images

Arvind Hickman is the editor of the International Accounting Bulletin.

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Our trade unions are doing more for women than ever before

You don’t have to look far to find examples of unions not just “noisily fighting for”, but actually winning better pay, terms and conditions for women.

Reading Carole Easton’s article on women and unions was puzzling and disappointing in equal measure. Puzzling because it paints a picture of trade unions which bears little resemblance to the movement I know and love. Disappointing because it presents a false image of trade unions to women readers just at a time when women need strong trade unions more than ever.

While it is right to say that too little progress has been made in closing the gender pay gap or tackling the scourge of zero hour contracts, it is wrong to suggest that trade unions have been twiddling their thumbs.

Like our friends at the Young Women’s Trust, equality is at the heart of what unions do. This work isn’t measured in the number of high-profile women we have at the forefront of our movement – although we’re not doing too badly there, as anyone will attest who has seen Frances O’Grady, the first female general secretary of the TUC, speaking out for ordinary women workers.  

Trade unions contribute to equality for our 3 million women members every day. For us, that’s about the thousands of workplace reps supporting individual women facing discrimination or harassment. It’s about health and safety reps negotiating for protective clothing and better workplace policies on the menopause, terminal illness and many more issues. Our work is unions taking employment tribunal cases on behalf of women who could never afford the tribunal fees without us. And always, at the heart of everything, our work is about the collective power of workers joining together to bargain for fair pay and decent work.

You don’t have to look far to find examples of unions not just “noisily fighting for”, but actually winning better pay, terms and conditions for women. Several unions have successfully organised cleaners, supported them to take strike action for better pay, and won. The RMT is just one example of many. Unite is busy organising London’s low-paid and often exploited hotel workers. Unison organises teaching assistants, fights for better pay and conditions, and even runs a Skills for Schools project to help TAs develop in their careers. Unison and the National Union of Teachers – both unions with over 75% female membership – organise childcare workers and fight not just for better pay but also for training and development opportunities. Over in the retail sector, Usdaw and GMB are fighting the good fight for their women members in supermarkets and shops, not just on pay but on pensions, health and safety, carers’ leave and protection from violence at work.

Women have much to gain from trade union membership. Male union members are paid 7.8 per cent more than men who aren’t in a union – but women union members are paid 30 per cent more than non-members. A recent EHRC report on pregnancy discrimination found that employers who recognised unions were less likely to discriminate against their pregnant employees.

Yes, it’s true that too few young women are union members. This summer, the TUC and our member unions will launch a new organising and campaigning effort to spread the benefits of union membership and attract a new generation of women (and men).

But starting new women-only unions is no form of progress. That’s where we started out over 100 years ago. Now women workers are at the heart of all our unions, across all sectors. Women’s concerns at work are trade union concerns. And every day we make practical progress towards women’s equality at work through patient representation and negotiation and active campaigning to challenge bad bosses. Young Women’s Trust should work with us to get more women the benefit of union membership.  

Scarlet Harris is women's equality policy officer at the TUC