Partners at KPMG UK are to take an 11 per cent cut to their pay, as the Big Four firm's continued investment in staff amid the Covid-19 pandemic held back profit from otherwise resilient revenues.
In annual results that were delayed for two months to assess the continuing impact of coronavirus, the business reported on Wednesday that like-for-like revenue in the year to September 30th fell 2 per cent.
Total revenue was down 4 per cent, from £2.4 billion (€2.73 billion) to £2.3 billion – reflecting the sale of the firm’s pensions business, which completed in March 2020.
Before the pandemic hit, KPMG UK had been achieving “high single-digit growth”, but revenues fell sharply as clients’ discretionary spending and deal activity dried up. As a result, planned investment in technology and staffing reduced the firm’s full-year underlying profit by 6 per cent year on year, from £307 million to £288 million.
Average partner profit distribution has been cut by more, however – by 11 per cent, from £640,000 to £572,000 – to protect other jobs and spend on supporting employees across the business. KPMG did not furlough any staff when the pandemic hit and went ahead with recruiting more than 900 graduates and apprentices, plus 950 “experienced hires”. Other costs included moving all UK staff to remote working and introducing an unlimited paid leave scheme.
Bill Michael, senior partner and chair of KPMG, said: “I am more optimistic than I was two months ago but the business is being as prudent as possible and making sure partners take a bigger hit than anyone else. It is about the wellbeing of our staff and our people.”
Partners will take a smaller hit than some UK rivals, though. In September, Deloitte, another member of the Big Four accounting firms, announced a 16 per cent fall in annual profit, and a 17 per cent cut in average partner pay, to £731,000. BDO, the UK's fifth-largest firm, later reported that average partner profit distributions would drop 14 per cent, to £518,000, as it chose not to cut costs.
PwC in the UK said in December that its partner pay would fall by a similar 10 per cent, to £685,000. Only EY has performed significantly better, with average partner pay sliding just 1.8 per cent to be £667,000.
At KPMG, audit was one of the strongest-performing operations, in spite of a series of damaging scandals at former client companies, including the failed UK outsourcer Carillion and a fund associated with collapsed German fintech Wirecard. It delivered 3 per cent year-on-year growth in net sales, to £606 million. – Copyright The Financial Times Limited 2021