Covid-19 impacts Deloitte’s growth

Covid-19 has hit growth at Deloitte, which saw a drop in activity in the final two months of the firm’s financial year, finishing with revenues totalling £4.31bn and partner pay falling by 16%

The Big Four firm reported revenues were up 9.1% overall for the year ended 31 May 2020, from £3.95bn in the previous year.

In the first ten months of the financial year, prior to the effects of the pandemic, revenue growth was close to 11%, with all businesses growing.

However, revenues in April and May 2020 were significantly impacted by Covid-19, with growth dropping to around 2%.

Distributable profit for the year ended 31 May 2020 was £518m, down 16% from £617m in the prior year.

Average profit per equity partner was £731,000, compared with £882,000 previously.

Donna Ward, Deloitte chief financial officer, said: ‘As a consequence of the pandemic, the firm’s growth has been less than planned.

‘We have carefully managed our resources throughout this period, implementing cost containment and liquidity enhancement measures so as to ensure the long term resilience of our firm. ‘We continue our focus on operational and financial resilience whilst also making considered, but strategic investment choices.’

The firm’s audit and assurance services grew 8.7% to reach £636m. Deloitte has recently announced the creation of a new audit governance board in response to the Financial Reporting Council’s call for the separation of audit work from other services.

Stephen Griggs, Deloitte’s UK managing partner and former managing partner audit & assurance, said: ‘We have committed to reforms that we believe will improve audit quality, increase choice and restore public confidence and trust in audit.

‘The audit governance board will have responsibility for providing independent oversight of our UK audit practice, with a focus on the policies and procedures for improving audit quality and ensuring the Financial Reporting Council’s objectives for, operational separation are met.’

The new board, with independent chair Margaret, Baroness Ford of Cunninghame, alongside Jim Coyle, Almira Delibegovic-Broome and Shirley Garrood as independent non-executives, will come into effect in January 2021.

Deloitte’s result show its consulting division posted the biggest hike in revenues, up 11.9%, to just over £1bn.  Financial advisory grew 5% to £525m, risk advisory posted 5.9% growth at £539m and tax and legal services saw a 7.1% increase to reach £939m. The results also include £590m from the firm’s operations in Switzerland.

Deloitte has 709 equity partners and 20,510 employees.

This year’s headline figures on gender pay gap improved slightly between FY19 and FY20 – with the total earnings gender gap, reducing by 4.5 percentage points from 39.3% to 34.8%. Deloitte also voluntarily reported on its ethnicity pay gap in FY20, which narrowed by 3.4 percentage points to 40.1% compared with FY19.

Dimple Agarwal, Deloitte deputy CEO and managing partner people & purpose said: ‘Both our gender and ethnicity pay gaps are a result of us having low female and ethnic minority (including Black) representation at senior grades, so we are working towards addressing this imbalance with a focus on recruitment, promotion and culture change.’

Commenting on the firm’s performance overall, Deloitte UK CEO Richard Houston said: ‘The last financial year finished in the shadow of Covid-19, which has first and foremost been a human tragedy, but also brought with it a level of global disruption we’ve never seen before.

‘Our immediate focus was ensuring the health and safety of our people, working with clients and suppliers to minimise disruption and supporting our communities to address challenges they faced.

‘I’m proud of what we have achieved. We safely transitioned 20,000 people and partners to remote working and played a key role supporting clients in their response to Covid-19, including the national response from government. We ensured our society partners could help those most in need, while also protecting jobs and the long-term resilience of our own firm.’

Useful links:

Deloitte Annual Report 2020

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