EY warns UK partners of potential profit slide
18 April 2024, 14:11 | Updated: 18 April 2024, 16:34
Hundreds of UK partners at EY, the big four accountancy firm, have been warned of a potential slide in profits this year amid a wider slowdown in the professional services sector.
Sky News has learnt that a presentation given last week by Stuart Gregory, a senior figure in EY's finance and transformation team, notified colleagues that profit-per-partner could slip by as much as 15% in its financial year to the end of June.
Last year, EY recorded average distributable profit per partner of £761,000 - down from a record £803,000 the year before, and well below rival PricewaterhouseCoopers.
A fall on the scale indicated by Mr Gregory would mean average partner profit in the year to the end of June 2024 falling below £650,000.
Insiders at the firm cautioned, however, that his comments did not amount to a firm profit forecast, and said that trading in the first part of its final quarter had been robust, with a strong pipeline of business over the next ten weeks.
EY is still expecting to record "a solid performance for this financial year," said one.
The firm has 1,700 partners in the UK, of whom 930 are equity partners, meaning they are eligible for a bigger annual payout.
The profit alert comes months after EY's global firm abandoned plans for a landmark split of its audit and consulting functions amid opposition in various parts of the world.
The rest of the big four - Deloitte, KPMG and PwC - have also been seeking to bolster profitability by cutting costs and jobs in a more challenging market environment.
Amid pressure on the audit profession from regulators in the wake of a series of scandals, the sector's leading quartet have begun to explore shedding certain parts of their businesses in recent years.
In the UK, both Deloitte and KPMG offloaded their restructuring units.
Industry sources said on Thursday that EY's Italian business had in recent weeks received a letter from CVC Capital Partners, the private equity firm, indicating an interest in acquiring its strategy and consulting arm in the country.
One insider suggested that the approach was likely to value the business at more than Euros500m, although they said no concrete negotiations were underway.
In a statement to Sky News, EY said: "Like other high-performing businesses, we frequently receive enquiries 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."
(c) Sky News 2024: EY warns UK partners of potential profit slide
