Skills shortage threatens tax consultancy industry: Young talent as a critical bottleneck

The tax industry is facing a key challenge that is affecting the majority of the approximately 10,000 independent law firms in Germany particularly hard: the shortage of specialists. While the "Big 4" and "Next 10" are still well staffed, some small law firms are struggling to survive. Indeed, new studies show alarming developments that pose a major risk to the future of the industry.

Dramatic figures

According to the Ifo Business Climate Index from March 2024, the shortage of skilled specialists has decreased slightly, yet "the problem is here to stay", says Ifo expert Klaus Wohlrabe. The service sector is being hit particularly hard by this: Some 42 percent of all companies state that they are suffering from a shortage of specialist personnel. In legal and tax consultancy, as well as auditing, some 69.2 percent cannot find the applicants they need. Demographic change in Germany is also having an aggravating effect here: Over 50 percent of tax consultants are aged 50 or above. The declining number of career starters is particularly problematic: Over the last 20 years, both the annual number of registrations for the tax consultant examination and the number of examinations passed have dropped off sharply.

Bottlenecks threaten operations

The result is a loss of revenue and the threat of law firm closures. According to a survey conducted by market research institute Innofact on behalf of Haufe, 30 percent of all law firms are even considering terminating existing client relationships due to bottlenecks. And one in four law firms will be forced to turn down new clients in future if the recruitment bottleneck does not ease. The situation is particularly serious for smaller law firms with fewer than 50 employees.

Challenges in recruiting young talent

Low salaries, limited career prospects and a lack of modern working time models often make smaller law firms unattractive to young talent. While large law firms score points by allowing staff to work from home, offering flexible working hours and personnel development programmes, small law firms often remain traditional and inflexible.

Increased digitalisation of law firm processes and the use of artificial intelligence could offer solutions here – although small law firms in particular often lack the resources to make the necessary investments. This leads to a vicious circle: without modernisation there is no attractiveness, without attractiveness there are no skilled specialists.

Tax industry at a crossroads

The ongoing shortage of skilled specialists requires not only technological innovations, but also a holistic transformation process. Approaches to make training more attractive, promote digital skills and develop modern working models will be key here. Only through proactive action can the industry secure its economic importance and remain attractive for future generations of skilled specialists.