Staff retention problems, partner succession issues and burdensome regulation is threatening British mid-size accountancy firms with almost three quarters fearing for the future, new research warns.

The study by practice management experts KATO Consultancy said 72 percent of independent British firms were worried about their continued existence. Staff retention difficulties was the most popular issue cited by respondents, while many said they were struggling to attract appropriately skilled potential partners for their practice.

Increased red tape and the heightened risk of litigation was also a major problem.

“Even though our experience shows that many firms are struggling with the change process, these results make very unexpected reading," Phil Shohet, KATO director, said. "Although some firms have obviously accepted the need for change in order to adapt to the needs of the modern marketplace and are managing the process extremely well, the majority are floundering around, knowing they are facing a crisis but unable to avert it.

“There is little doubt that many of the firms responding to this survey will no longer exist in five years' time. This is not only bad for the profession, it is bad for the clients as it reduces their choice and, inevitably in a shrinking market, means that they might have to pay more for services.”