Grant Thornton makes redundancies to weather Covid-19 crisis
As it braces for a 20% fall in profits, Grant Thornton has become the first top-tier professional services firm to announced redundancies during the coronavirus pandemic. The news that 70 jobs in the firm’s tax and consulting divisions were scheduled for the axe has angered some, as Grant Thornton has steadfastly refused to avail itself of the Government’s job retention scheme.
For three months from the start of March, companies were been told by the Government they could furlough employees rather instead of firing them – something the Government hoped would preserve jobs and enable the UK to bounce back from the economic impact of the lock-down once Covid-19 finally subsides. The scheme was recently extended, albeit with some changes, to continue fulfilling this role until the autumn.
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 – and as a result, it is not surprising that many of the UK’s professional services firms have sought to tap into the furlough skin.
A host of mid-tier firms have done so; but the top six largest professional services firms decided to take a more cautious approach to the offering. The six biggest consulting and accounting firms held a virtual meeting in April to discuss the risk to their reputations of accepting Government funds to furlough employees – since which BDO has been the only one to do so.
Grant Thornton, on the other hand, has steadfastly refused to avail itself of the furlough scheme, for fear of further reputational damage it would cause – following several scandal-stricken years for the country’s largest audit firms. To that end, earlier in the spring, Chief Executive David Dunckley said Grant Thornton would not use the scheme because it was not “appropriate.” Instead, the firm cut the pay and hours of 300 employees but pledged that no employee would be worse off as a result of its cost-cutting measures than if they had been placed on the furlough scheme.
Months later, Grant Thornton has come under fire for seemingly changing that stance, announcing around 70 jobs in its tax and consulting divisions would be made redundant. The sixth largest advisory firm in Britain by revenue made the announcement on the last date employers could apply to use the Government’s furlough scheme, angering some of Grant Thornton’s staff.
A comment from the company sought to address this, stating, “The furlough mechanism was designed to preserve roles that had temporarily diminished or ceased as a result of Covid-19 and where there is a reasonable prospect of that work returning as the UK comes out of lockdown. As these roles at risk were deemed unsustainable in the future, it would be inappropriate for them to be furloughed.”
Some workers disagree with that stance though. Commenting on the news, one employee told the Financial Times, “It is hard to accept that the firm refused assistance from the Government’s job retention scheme… Clearly being on the furlough scheme until October 31 and then facing redundancy is better for an employee than being made redundant in July.”
Partner pay
Grant Thornton has also declined to cut the monthly payments its 190 partners receive from the firm’s profits. Some rivals have cut partner pay by 20-25% to increase cash reserves. In April, for example, PwC said it would take measures to preserve jobs and help external suppliers which were understood to include the delaying profit distributions to partners.
Following that lead may be easier said than done for Grant Thornton’s current leadership, however. CEO Dunckley’s predecessor Sacha Romanovitch was ousted from her role after overhauling the firm’s partnership structure to make it a John Lewis-style profit-sharing scheme for all staff, rather than just partners. The move led to a group of angry partners leaking an unsigned complaint saying she had “misdirected” the firm, and accusing her of pursuing a “socialist agenda.”
With this in mind, and a possible 20% fall in profits currently being forecast at Grant Thornton for this financial year, Dunckley’s room for manoeuvre on cutting partner pay-outs is rapidly diminishing. Despite change at the top, Grant Thornton’s partners have continued to see profit distribution shrink. In the 12 months to January, the firm made profits of £68 million and revenues of £514 million, while partners earned an average of £323,000 in 2019, 13% less than the year before.
Meanwhile, in the US, Deloitte last week axed 5,000 jobs as part of its Covid-19 downsizing strategy.
