Professional Services: When standing still is moving backwards

Background

PryceWilliams attended the MTM Small to MidCap M&A Conference held on Tuesday 3 March 2026 at Schroders in London. The event brought together around 200 attendees from across the professional services and advisory sectors.

One of the keynotes that resonated with our firm was the one by Cahal Dowds, Deloitte Partner and founder and Chair of Continuum Advisory Partners. Cahal highlighted a number of structural forces that are reshaping the professional services landscape, particularly for accountancy and advisory firms serving the SME market. The central message from that talk was that standing still is increasingly damaging for professional services firms. Rising regulatory costs, increasing technology investment requirements and ongoing pressure on talent are forcing firms to rethink how they operate and compete.

Approach

The conference explored the strategic challenges currently facing professional services firms and the choices firms must make in response. Discussions focused on four structural pressures affecting the sector, the growing divide between firms investing in their future and those that are not, and the strategic importance of the SME client relationship.

Analysis

Four structural forces are shaping the environment in which professional services firms operate.

The first is the ongoing talent crisis. Staff retention continues to be a major concern across the sector, with 67 per cent of firms citing it as their number one risk. Firms that are succeeding in attracting and retaining talent are often those offering equity or equity-like career structures. This is particularly common among private equity backed firms or independent firms seeking to provide clearer long term incentives and career pathways for high performing professionals.

The second force is the widening technology gap. Technology investment across the UK consultancy sector has increased by 20 per cent. The level of investment required means many firms must make a strategic decision about how to fund it. In practice this often involves either raising external capital or reallocating partner profits. In both cases the decision represents a deliberate choice about the firm’s future operating model.

The third force is increasing regulatory complexity. Compliance costs for UK firms have risen by around one third since 2021, well above inflation. The growing cost of regulation increasingly favours firms with scale, as larger platforms are often better able to absorb and manage the associated costs.

The fourth force is what was described as the succession cliff. Only 41 per cent of UK accountancy service firms currently have a formal succession plan in place. As leadership teams approach retirement, the window to plan succession on favourable terms is narrowing. Firms that address succession earlier are more likely to retain control over how ownership and leadership transition takes place.

Alongside these structural pressures, the conference highlighted a widening gap between firms investing in their future and those that are not.

Firms that are investing are increasingly expanding across multiple service lines. Rather than focusing solely on traditional accounting services, many firms are building capabilities across advisory, compliance and specialist services. This allows them to deepen client relationships and capture a larger share of client spend.

Investment is also playing a role in the competition for talent. Firms offering meaningful incentives such as equity participation, profit sharing or more modern career structures, combined with better technology and infrastructure, are often more successful in attracting and retaining experienced professionals.

Expanding service offerings also strengthens client relationships. When firms provide a broader range of services to the same client, switching costs increase and client loyalty tends to deepen. This makes it more difficult for competitors to displace an established adviser.

By contrast, firms that are not investing face increasing pressure. Better funded competitors are targeting higher margin work, particularly advisory and specialist services. As mandates are lost, the revenue base can narrow further.

Talent challenges also tend to compound. High performing professionals often move towards firms offering stronger incentives, better infrastructure and clearer career progression. This can leave smaller or slower moving firms with heavier workloads and thinner talent benches.

Technology is another area where the gap can widen quickly. Firms that are not investing in areas such as automation, artificial intelligence and modern client platforms may find it increasingly difficult to compete on efficiency or service quality.

Another important theme discussed at the conference was the strategic value of the SME client relationship. In many cases the most likely buyers of accountancy firms are not other accountants, but organisations seeking access to SME clients.

One example is insurance. SME commercial insurance, including areas such as cyber, directors and officers liability, professional liability and key person cover, represents a growing market. Accountants often act as a natural distribution channel because they have a strong understanding of their clients’ financial position and risk profile. Embedding insurance services at the point of compliance can create significant opportunities for conversion.

Wealth management is another area of opportunity. SME owner managers often fall into an underserved affluent or high net worth segment. Services such as pensions advice, succession planning and tax efficient investment strategies frequently originate from the accounting relationship. Firms such as Cooper Parry and AAB have demonstrated that integrated wealth management services can operate successfully within an accountancy firm.

The same principle applies to a wider set of professional services. SME clients frequently require legal advice, corporate finance support, HR services and payroll. A platform model allows firms to generate multiple revenue streams from a single client relationship. These relationships are often recurring in nature and can achieve retention rates of around 90 per cent.

Conclusions:

The MTM Small to MidCap M&A Conference highlighted that the professional services sector is experiencing significant structural change. Talent shortages, rising regulatory costs, technology investment requirements and succession planning are all influencing how firms must think about their future.

Firms that invest in talent, technology and broader service capabilities are strengthening their competitive position and deepening their client relationships. Those that delay strategic decisions risk falling further behind as the gap between leading and lagging firms continues to widen.

Recommendations

For professional services firms, several considerations emerge from the themes discussed at the conference. Firms may need to increase investment in technology, automation and modern infrastructure to remain competitive. Developing clear talent strategies, including long term incentives and modern career structures, is likely to remain critical in attracting and retaining skilled professionals.

Expanding across adjacent services may also help firms deepen client relationships and capture a greater share of client spend. This may include exploring opportunities in areas such as wealth management, insurance or other professional services that complement the core accounting relationship.

Finally, succession planning is becoming an increasingly important strategic priority. Firms that address succession earlier are more likely to retain control over ownership transitions and long-term direction.

Next steps:

As competitive pressures continue to increase across talent, technology and regulation, many firms face a fundamental strategic question about how they wish to position themselves for the future. Those that make deliberate decisions about investment, service expansion and operating models today are more likely to shape their own outcomes rather than react to external pressures as the market continues to evolve