Accountancy & Management: Andersen climbs up fee league: Roger Trapp reports on how a big rise in insolvency work has boosted income

ARTHUR Andersen has leapfrogged two of its rivals to take fourth place in the annual league table of accountants' fees.

Andersen's 17.4 per cent rise in income, to pounds 388.6m, in the year to 31 March contrasts with the performance of the other big six firms, which averaged a fall of more than 2 per cent. No profit figures are available because, as a partnership, the firm - like its rivals - is not obliged to report them.

The organisation's growth was largely the result of a 25.1 per cent expansion in consulting, traditionally a strong area for the firm. But the mainstream accounting business still grew by 8.9 per cent.

The only comparable overall increase came at the foot of the table, where Stoy Hayward's near-10 per cent rise reflected the merger during the year with Finnie & Co. Otherwise it would have been about 4 per cent lower.

Roy Chapman, Andersen's UK managing partner, stressed there was no 'magic formula' that made the practice do much better than its rivals. The most important factor was focus, or 'taking a long view with clear thinking'.

Nevertheless, as he pointed out, audit saw new business almost cancelled out by clients lost due to the recession, so that fees in this division rose by only 3.7 per cent. Tax work, meanwhile, was boosted by demand for profit-related pay advice.

In the past year Andersen has continued to be active overseas, notably in financial consulting and litigation support. In addition to its regular cross-border activity, it carried out assignments for governments in central and Eastern Europe.

But the real star performer was corporate recovery, or insolvency, which followed last year's rise of 46.3 per cent with a 40.6 per cent increase, to pounds 25.3m. The department's most prominent role is as administrator to parts of the late Robert Maxwell's collapsed empire. But Mr Chapman attributed 'another year of progress' to increasing recognition for the constructive quality of the department's work. 'In the cases of Leyland DAF and British International Helicopters, thousands of jobs have been saved,' he said.

Last year, this side of the accountancy business saved many leading firms from embarrassment. But the latest figures show no consistent rise in insolvency fees.

Indeed, Coopers & Lybrand - which in Cork Gully incorporates the best-known name in the field - insists that it has retained its market share. But it reported a 1 per cent drop in fees compared with the hefty rise by Andersen and other rivals. There was a 24 per cent rise at Ernst & Young, administrator to Olympia & York, and 15.4 per cent growth at KPMG Peat Marwick, where Rosehaugh Properties and the Trocadero in the West End of London were key insolvency appointments.

Touche Ross, which is receiving about pounds 600,000 a week in fees for work on the liquidation of Bank of Credit and Commerce International, reported a rise of only 2.8 per cent, to pounds 42.6m. But John Rocques, senior partner, said: 'We believe there are signs that work on insolvency assignments is falling whilst our other divisions will show a stronger performance in the current year.'

Nor is he the only one looking to the economy for salvation. Ian Brindle, his counterpart at Price Waterhouse, one of the firms overtaken by Andersen, said: 'We went into the recession behind our clients, and we must expect to trail behind them in coming out of it. There are increasing signs of an upturn in the economy, and if this recovery is sustained we can expect to announce improved results next year.'

But for the moment, all the firms - except Andersen - are suffering from the tough conditions. Mr Brindle said: 'This time last year I said that trading conditions during the previous year had been the most difficult we had ever experienced, and the business environment has been even more challenging this year.' And Brandon Gough, head of Coopers & Lybrand, the largest firm, said: '1992/93 will be remembered as the third successive year of recession during which the market served by the major accountancy firms suffered a continuing squeeze.'

Mr Gough is also less sanguine about the future than some rivals, saying that 'a degree of uncertainty' about the form of the economic recovery was likely for the rest of this year. He talks the recessionary language of consolidation - even casting the move into a state-of-the-art office building near Charing Cross in this light because of the improved efficiencies it brings.

Meanwhile, Jim Butler, retiring senior partner of KPMG, said it was - in line with the current vogue for accountants to be 'business advisers' - seeking to get closer to clients and 'better understand their businesses'.

While Mr Gough describes last month's admission of 36 new partners as 'a sign of commitment to the future', Coopers had 14 fewer partners at the end of April than it did the year before. And the picture - though less bleak than last year - is similar elsewhere. At Price Waterhouse the number of partners remained constant at 482, but professional staff fell 6 per cent to just over 4,300. At Touche the fall in partners and other fee earners was even larger, more than 10 per cent, to 4,300, while Ernst & Young reported 12 fewer partners and chargeable staff down more than 400.

Once again, Andersen, proud of a Mori poll finding that the firm was the best- known employer of graduates, was the exception. It reported 247 partners, up 13 on the previous year, and an overall increase in chargeable staff of 3.6 per cent.

----------------------------------------------------------------- LEADING UK ACCOUNTANCY FIRMS ----------------------------------------------------------------- Company Fee Increase Audit Insolvency Number of Other income income income partners prof. pounds m % pounds m staff Coopers & Lybrand 553 -4 237 73 701 6,498 KPMG Peat Marwick 490.7 -0.8 196.3 58.4 598 6,463 Ernst & Young 390.6 -2.1 176.6 38.2 399 4,672 Arthur Andersen 388.6 17.4 81.4 25.3 247 3,707 Price Waterhouse 385.7 -3.7 152.7 40.9 482 4,328 Touche Ross 345.5 -1.2 161.8 42.6 370 3,933 Grant Thornton 113.8 -3.9 40.3 29.2 208 1,594 BDO Binder Hamlyn 108.5 -5.2* 65.1 7.6 217 1,597 Pannell Kerr Forster 83.1 -3 47 16.3 189 1,538 Stoy Hayward 74.7 9.4 37 14.9 169 1,183 * of which 1% is due to merging investment management into a joint venture -----------------------------------------------------------------

(Photograph omitted)