Should the Big Four become the Big Two plus two?

Deloitte may have retained its title this year as the largest accountancy firm in the world, but in the UK PwC is the undisputed leader of the Big Four

The firm’s sparkling performance over the year to 30 June 2019 saw fee income rise by 12% to £4.23bn – the highest growth rate among its rivals.

Weirdly, the UK practice includes PwC Middle East (which grew by 19.1%). So, including its contribution, assurance revenues increased by 8.1%, consulting by 22.1% and deals by 8.7%. Its tax practice revenues rose by 13.5%.

PwC UK chairman and senior partner Kevin Ellis commented at the time that the firm had experienced high demand for its core services, in particular, for technology-related solutions.

Deloitte – which includes the results of its Swiss practice (up 10%) in its figures – also had a good year, reporting a growth rate of 10.9% and fee income of £3.97bn in the year to 31 May. Interestingly, its partners are the best paid out of the four – they received an average of £882,000 (a record, thanks to the one-off sale of an investment) over the last year, compared to PwC partners’ £765,000.

Deloitte’s audit and risk advisory sector grew by 8.1%, consulting by 9%, financial advisory by 10.5% and tax and legal by 17.8%. It also reported that long-term investments across its business were beginning to show results, including in its audit quality with improved regulatory ratings.

In contrast, both smaller Big Four firms EY and KPMG grew at much slower rates, opening up the gap between them and their far larger peers.

Over the next couple of years, if PwC maintains its rate of growth, it is possible that it could end up being double the size of KPMG, the smallest of the Big Four. KPMG reported fee income of £2.4bn, up 3%, over the year to end 30 September.

EY, meanwhile, was the poorest performer with fee income of £2.45bn, up 1.5% in the year to 30 June 2019. Of the major services lines, transaction advisory grew by 9%, tax by 8% and financial services slightly increased by 0.2%. Advisory and assurance revenues, however, declined by 3% and 5% respectively.

Partners at both KPMG and EY took a cut in pay: KPMG partners received £640,000, down 7.8% from £690,000 in 2018, while EY partners received £679,000, down 2.1% from £693,000 in 2018.

Both firms were keen to point out that they had spent millions on investing in the future of the firm, including adding new hubs around the country and in developing audit products and upskilling their staff.

 

Originally published in Economia 11 December 2019.