Ernst & Young (EY), one of the big four accounting firms, has warned its 1,700 UK partners of a potential 15% decline in profits this year due to a broader slowdown in the professional services sector. This cautionary note was delivered in a presentation last week by Stuart Gregory, a senior figure in EY’s finance and transformation team.
Last year, EY reported an average distributable profit per partner of £761,000, a decrease from the previous year’s record of £803,000. A drop, as projected by Mr. Gregory, would see the average partner profit for the financial year ending in June 2024 fall below £650,000.
However, insiders at the firm have clarified that Gregory’s comments do not represent a firm profit forecast. They indicated that the trading in the initial part of the final quarter has been strong, with a robust pipeline of business anticipated over the next ten weeks. “EY is still expecting to record a solid performance for this financial year,” one insider said.
The warning from EY comes after the firm globally abandoned plans for a significant split of its audit and consulting functions earlier this year, amidst opposition from various parts of the world. Similarly, other members of the big four – Deloitte, KPMG, and PwC – have been working to enhance profitability by implementing cost-cutting measures and job reductions in a challenging market environment.
In recent years, the audit profession has faced increasing pressure from regulators following a series of scandals, prompting the leading firms to consider shedding certain parts of their businesses. In the UK, both Deloitte and KPMG have offloaded their restructuring units.
Meanwhile, EY’s Italian business has received preliminary bid interest from CVC Capital Partners, a private equity firm, for its strategy and consulting arm in the country. While the approach is believed to value the business at more than €500 million, no concrete negotiations are currently underway.
In response to the bid interest, EY stated, “Like other high-performing businesses, we frequently receive inquiries from private equity firms and other investors expressing interest in parts of EY businesses. The CVC approach was a preliminary expression of interest. As part of our global strategy, we continue to evaluate our strategic opportunities and will only entertain transactions at the right time and after careful consideration. There are no plans to sell any part of our business at this time.”
