A GLOBAL PERSPECTIVELondon, 6th October 2016Anders Heede, BDO International

The Global Economy is transitioning

4 Developments

Our Industry

THE WORLD ECONOMYSelect economies, average annual GDP growth

10.0 8.0 6.0 4.0 2.0 - -

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

2000-2014 Realized

15-2

0 Fo

reca

st China

India

RussiaBrazil

HKAus

Mex

Japan

NLF

D Can

UK US

Accelerating

Slowing down

Source: IMF

BREX

IT

THE END OF THE SUPERCYCLEOil and resource driven economies

BrexitRefugees

Eastern UkraineRussian sanctions

Italy & Greece

Corruption & tribal politicsRaw material prices

Oil priceEconomic meltdown

Election Economic slowdownCorruption

Reforms

Oil priceISIS & Al Qaeda

Political stability?Iran?

Oil priceRecession

Raw material prices

Deflation

Raw material prices

Failed socialist experiment

?

?

?

GLOBAL UNCERTAINTIES

15.000.000.000 $In fines by DoJ to non-American Banks since 2010

77 mill. population - very educated

Large industries – 1.4 mill. cars in 2012

Tremendous reserves (Zinc #1, Copper #2, Oil #3 & Gas #2)

Substantial business interests, especially Europe

IRAN

…NO access t

o the

international banking

system

THE MARKET THAT HASN’T EMERGED

THE ECONOMIC GRAVITAS OF BREXITGDP, 2015

Source: IMF, 2015, Jyllandsposten

US25%

EU23%China

15%

RoW37%

100% = 73,170 Bill. USD

DE21%

UK17%

FR15%

IT11%

RoEU36%

100% = 17,029 Bill. USD

Global Economies EU Economies

‘IT’S THE ECONOMY STUPID’GDP growth, 2008=100, Market prices, 2005 USD

Source: World Bank

2008 2009 2010 2011 2012 2013 2014 90

100 110 120 130 140 150 160 170

EU

US

India

China

CASE: AUTOMOTIVE INDUSTRY

Source: FT

• 1.6m produced annually• £15bn turnover• 800,000 jobs• 80% exported – half to EU• 12% of goods traded• Honda

• 140,000 cars p.a.• £2.3bn investment• UK = 40% of EU business

CASE: CITY

Source: FT, UK Government

• Financial & insurance sector: – 8% of economy in

2014– 1.1 mill. jobs– £79 bill. trade

surplus– 12% of tax-income

• 78% of EU capital market activity through London

• 37% of global currency transactions in 2009

Clearing houses

Banks Pension funds

Brokers

Hedge funds

Private Equity firms

Insurance firms reinsurance

markets

Exchanges

Investment Managers

Professional service firms

World Class Ecosystem

15 largest networks international HQ’sLONDON AS THE CAPITAL OF PROFESSIONAL SERVICES

BREXIT’S IMPACT ON PROFESSIONAL SERVICES

BREXIT

Terms emerging

Duration?+24 months

Will London remain the professional and financial

center of the world?

The Market

POSTPONEMENT RESTRUCTURING NEW NORM

Public sector consulting

Article 50Mar.’17

The Global Economy

Four developments reshaping our markets

Our Industry

REGULATORY CHANGE: EU AUDIT REFORM

EUROPEAN UNION PIE DATANo. of entities within the EU25.6mNo. of entities classified as large (incl. PIEs)3.5mLarge entity % share of total market cap93.3%

CHINA

Source: McKinsey

CHINESE MARKET

Source: CICPA

Mill. CNY

Ranking No. of SOE clients

BDO

THE WAR FOR TALENT

Source: Hays/Oxford Economics Global Report, June 2011

Change in working age population 2010 to 2030, mill.

-13

-8

-4-3

Japan Germany South Korea

Italy

TECHNOLOGY DISRUPTION

Xero The world’s largest accounting service provider does not employ accountants?

The Global Economy

4 Developments

Our Industry is changing fundamentally

TODAYS COMPETITIVE LANDSCAPETotal fee income 2015 (Bill. US$)

Source: IAB 1.0

1.4

1.9

2.0

2.7

3.1

3.5

3.8

4.6

4.6

7.3

24.4

28.7

35.2

35.4

PKF

Mazars

HLB

Kreston

Moore Stephens

Nexia

Crowe Horwath

Baker Tilly

Grant Thornton

RSM

BDO

KPMG

EY

Deloitte

PWC

BIG 4, BIG 3 OR BIG 2?Total fee income 2006-2015 (Bill. US$)

Source: IAB2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

15.0

20.0

25.0

30.0

35.0

THE OVERCROWDED MID-MARKET*Total fee income 2006-2015 (Bill. US$)

*: The 5 to 15 networksSource: IAB

2006 2007 2008 2009 2010 2011 2012 2013 2014 20150.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0BDO

GT

BTCHNexia

KrestonHLBMazars

PKF

MS

RSM

THE CHANGING MID-MARKET

Source: IAB

Fee

inco

me

Number of countries

BDO

BTGTRSM

PKFMazars

Kreston HLBMS

CH

Nexia

� Regulatory change and cost of quality

� China as market maker

�War for talent

� Technological disruption

THE CHANGING MID-MARKET

Source: IAB

Fee

inco

me

Number of countries

� Regulatory change and cost of quality

� China as market maker

�War for talent

� Technological disruption

OUR INDUSTRY TODAY

Cloud

Payroll

Acct’g

…Cyber

PeopleCSR

ITMngt

CF Risk

LegalServicesAdvisoryTaxAudit

OUR INDUSTRY TOMORROW?

Legal

ServicesAdvisory

Tax

Audit

Banks

IT Firms

Regulators

Technology

Tomorrows competitors

Todays Market Makers

Audit firm of the future

THANK YOU