BDO furloughs 700 UK staff
Mid-tier advisory and accounting firm BDO has furloughed 700 of its UK staff, as the professional services industry looks to weather the economic storm caused by the Covid-19 lock-down. The firm has also confirmed that its Partners will have their dividend payments frozen until January 2021, alongside a monthly pay cut up to 25%.
Recent analysis by Source Global Research suggests that the UK consulting market could see a revenue fall of an estimated 28% over the course of 2020 – plummeting from £8.6 billion in 2019 to as little as £6.1 billion. That retraction would see the market shrink to its smallest size since 2013.
In a bid to offset the worst impacts of this jarring drop in income, many firms have drafted emergency plans for the coming months. Marie Wadeson, a Partner at Quantuma, recently confirmed this was the case in an interview with Consultancy.uk, suggesting that while there hasn’t been a spike in advisory firms seeking support from corporate recovery specialists, many big names are looking to “minimise costs” themselves.
Wadeson stated, “We know firms like the Big Four are considering the reputational implications of furloughing their staff. Previous employers of mine are furloughing staff – and that’s something representative of consulting’s mid-tier as a whole.”
Indeed, due to their smaller national revenues, mid-tier firms are much less insulated from the effects of Covid-19 than the likes of Deloitte, PwC, EY and KPMG, meaning they have been unable to spend as much time weighing up the reputational impacts of using Government aid. As a result, professional services firm BDO has announced it is furloughing 700 of its UK staff.
Commenting on the situation, a BDO spokesperson told Accountancy Age, “There is general consensus that we are either in, or about to enter, a severe global recession. Governments around the world are introducing economic policies and support packages to help businesses protect job… BDO is not unaffected by the situation and we have had to take clear – but temporary – measures to ensure we can weather the current storm and protect jobs.”
For three months from the start of March, companies have been told by the Government they can now furlough employees rather instead of firing them – something the Government hopes can preserve jobs and enable the UK to bounce back from the economic impact of the lock-down when Covid-19 finally subsides. The scheme sees the Government paying up to 80% of people’s wages, up to a maximum of £2,500 per month. Anyone working in a full time job (or on a PAYE basis) on March 19 can be furloughed, including people on zero hours contracts or those working flexibly.
The furloughed BDO staff are made up of 470 first-year trainees and 230 support staff, in a bid to minimise its costs while clients scale back on projects during the current crisis. The firm’s partners will also have quarterly dividend payments frozen until January 2021, alongside a monthly pay cut up to 25%. As was the case with PwC earlier in the month, the firm has also frozen all pay raises, promotions and new recruitment for its 5,500 UK staff, although offers already made to 400 trainees to join at the end of the year remain valid. Mazars similarly furloughed 200 employees in April, and reduced its Partner earnings by 25%.
Two-thirds of British businesses have already used the government's scheme since it was announced, and one-in-three companies have put at least 75% of their workforce on furlough, according to a survey published by the British Chamber of Commerce. If this pattern is repeated across the economy, then between seven million and ten million people, or at least one-third of private sector employees, will be furloughed, according to analysis from think-tank the Resolution Foundation.