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EY warns UK partners of potential profit loss | business news

EY warns UK partners of potential profit loss |  business news

 


Hundreds of UK partners at Big Four accountancy firm EY have been warned that profits are likely to fall this year due to a wider slowdown in the professional services sector.

Sky News reported last week that Stuart Gregory, a senior member of EY's finance and transformation team, gave a presentation to colleagues saying profits per partner could fall by up to 15% in the financial year to the end of June. I found out that the truth was reported.

Last year, EY recorded an average distributable profit of £761,000 per partner. This is down from the previous year's record of £803,000 and significantly lower than rival PricewaterhouseCoopers.

The reduction in scale pointed out by Mr Gregory means average partner profits for the year to the end of June 2024 will fall below £650,000.

But company insiders cautioned that his comments were not in line with corporate profit forecasts, and said trading was brisk in the first part of the final quarter and there was a strong business pipeline for the next 10 weeks.

EY still expects to record “solid performance this fiscal year,” one of the people said.

The firm has 1,700 partners in the UK, 930 of whom are equity partners, enabling them to receive larger annual payouts.

The profit warning comes months after EY's global arm abandoned plans for a landmark spin-off of its audit and consulting functions amid opposition from around the world.

The remaining big four – Deloitte, KPMG and PwC – have also been trying to strengthen profitability by cutting costs and jobs in a more challenging market environment.

With regulators putting pressure on the auditing profession following a series of scandals, the leading quartet has begun looking to shed certain parts of its business in recent years.

In the UK, Deloitte and KPMG have both offloaded their restructuring departments.

EY's Italian unit received a letter in recent weeks from private equity firm CVC Capital Partners indicating interest in acquiring its strategy and consulting division in Italy, industry sources said on Thursday.

An insider suggested this approach could potentially value the business at more than €500 million, although no specific negotiations are underway.

“Like other high-performing companies, we frequently receive inquiries from private equity funds and other investors expressing interest in parts of EY’s business,” EY said in a statement to Sky News.

“The CVC approach was a preliminary expression of interest.

“As part of our global strategy, we continually evaluate strategic opportunities and will only accept transactions at the appropriate time and after careful consideration.

“At this time, we have no plans to sell any part of our business.”

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