As Foulger Underwood continues to deepen its offering across the European corporate services market, it’s been fascinating to see the trends and developments as they evolved over the last six months.
The issues and solutions are not necessarily the same issues as those impacting other professional services areas such as accountancy and law, but some comparisons can be made.
For example, demand for services has never been greater. This is also true for most professional service sectors. In some resource-critical locations such as Luxembourg, decisions are being made to find a way to provide such services more efficiently. This has included investment in technology, in particular, around automation where AI is contributing as a tool to bring about change.
Profitability and client retention
Attempts to drive efficiencies to improve margins are prevalent across the market; and we have seen certain jurisdictions suffering much lower profitability than others. There are growth opportunities where accountancy and corporate services cross-over, for example, in the offering of additional services such as payroll.
There also appears to be more recognition as to the importance of maintaining and growing sticky clients. The difference with UK and Ireland is the focus on using consolidation as the main lever for building scale.
AI – not there yet
The question of service providers investing in IT and AI to generate increased margins is open for debate. Clients are similarly using AI for their own processes and are anticipating suppliers to maintain or reduce fees through their adoption of AI. It is not a panacea, necessarily, for increasing profitability with the service provider however, the costs of technology and AI will certainly need to be funded going forward with a need to repeat or augment the investment on a three-to-four year cycle as applications and systems develop in a rapidly closing window.
Extraneous events which are uncontrollable, such as the ongoing way in the Middle East, are not only likely to bring inflationary pressure to bear on services sector margins but will likely have a dampening effect on growth.
Finally, a key issue impacting UK and Irish professional services firms has been sustainability and succession. This has helped create an impetus for investment-driven acquisitions. Succession is currently less of an issue among European corporate services providers, but investment is being sought to help grow firms organically and through M&A.
Undoubtedly there is a focus on evolving models, developing services and expanding into new territories. We look forward to helping firms make their move.
Keith Underwood is MD of Foulger Underwood
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