KPMG to slash Partner headcount despite making profit
The British wing of Big Four professional services firm KPMG is planning to cut its Partner headcount, according to reports by the Financial Times. The cull comes despite KPMG being expected to report a hefty profit from its UK activities in December.
The UK arm of KPMG has undergone a number of dramatic changes in 2019. The professional services giant recently sunk £45 million into its Audit arm in order to beef up its accounting standards, following revelations that KPMG carried out deeply flawed audits at a number of clients in the UK. Meanwhile, the firm opted to put its pensions advisory wing up for sale, entering into talks with Exponent Private Equity in October. If a deal is realised, it is anticipated to be worth in the region of £200 million.
Among this sea of change, though, KPMG UK still seems to be on course to make a tidy profit in 2019. Average pay per partner is expected to be £550,000 when the firm publishes its 2019 results next month, on the surface seemingly indicating 12 months of healthy economic performance. Good, it seems, but not good enough for the company’s expectations.
According to reports from business news provider The Financial Times, KPMG is set to axe as much as a tenth of its UK Partners by Christmas. The cull comes as overall performance of KPMG looks set to continue to slide year-on-year. While many firms would be over the moon at a profitability that allowed it to deliver £550,000 pay-outs to Partners, this constitutes a fall of almost 10% on last year’s figures, which in turn represented a decline. KPMG UK made profits of £356 million in 2018, well below those of five years ago, when it made £414 million.
Regulatory fines totalling around £20 million in the past year, public scrutiny around its controversial audit of Carillion, and a number of high-profile Partner exits seem to have taken their toll on KPMG. As a result, UK Chair Bill Michael informed Partners recently that the firm would be adopting a harsher approach to managing performance, according to a source speaking to The Financial Times.
The firm now intends to cut around 65 of its UK partners, the source added, meaning it will be the biggest single cut of Partners in several years. The last time it took such drastic action, KPMG cast out 500 UK Partners in early 2016, as part of a top-level restructuring. The latest exits will reduce KPMG’s current partnership from 635 members to about 570, shrinkage of around one-tenth, though this will likely be partially negated by the promotion of new Partners.
A statement from KPMG on the matter read, “It is critical that our firm constantly evolves as we build the mix of capabilities required to service the changing needs of our clients. To achieve this, we are significantly increasing our investment in all of our core businesses — audit, tax, deals and consulting. This year we have appointed 50 new partners and 200 new directors, across all parts of our business.”
Earlier in the Autumn, KPMG also unveiled plans to shed hundreds of admin positions from its pay-roll, as it continued its cost-saving drive. Reports suggested that between 200 and 250 administrative support staff were expected to leave, meaning some Partners would no longer have access to a personal assistant.
