Big Four accounting firm PwC has reported record fee income of £4.23bn as partners are set to receive a partner payout of £765,000 and group profitability breaks the billion pound barrier
PwC UK increased its revenue for the year ended 30 June 2019 by 12% to £4.23bn up from £3.76bn on the previous year.
Profit for the financial year was £1,016m (2018: £935m) and the average distributable profit per partner before tax was up 7.5% at £765,000 (2018: £712,000).
Assurance revenues, which included audit fees, increased by 8.1% to £1.44bn (2018: £1.33bn), consulting revenues were up by 22.1% to £950m (£778m) with more than 10% of this revenue relating to public sector consulting contracts while the tax practice, which includes specialist areas such as workforce consulting, legal services and pensions, broke the billion pound barrier for the first time with reported growth of 13.5% to reach £1.06bn, up from £941m year on year. Deals – including merger and acquisition work - grew by 8.7% to £773m (2018: £711m).
‘All of our businesses grew, as we responded to market demands and supported clients with their challenges,' said Kevin Ellis, chair and senior partner of PwC. ‘In the face of uncertainty and the fourth industrial revolution, clients sought our support to transform their businesses, with 21% of revenues this year coming from technology-related services.’
Despite heavy criticism of the audit profession and calls for a root and branch overhaul of the whole market, with threats of mandatory joint audits and even a break-up of the Big Four audit firms under consideration, PwC has grown its share of the audit market, picking up a number of major audits.
These include the £2.8m FTSE 100 speciality chemicals group Johnson Matthey, £7m Anglo American mining conglomerate audit and £1.7m Cineworld account. It is also the first year the firm will benefit from new audit contract wins, including the £5.9m Rolls-Royce audit contract, although it has lost some major audits to Big Four rivals.
During the year, PwC was under the cosh over an investigation relating to the 2014 audits of BHS and the Taveta Group which resulted in a £10m fine for the firm, announced in August, reduced to £6.5m on settlement, and a £325,000 fine for audit partner Steve Denison (discounted from £500,000).
As the largest UK auditor by revenue with 34 FTSE 100 audits valued at £257m for audit fees alone, PwC has rejected moves to break up the firm into a hived off audit business, saying it would dilute the audit practice and increase costs for clients as specialist services would have to be bought in, rather than using internal resources and upscaling staffing on audits as required.
Ellis said: ‘We welcome more choice in the market and reforms that will improve audit quality and are committed to playing our part in building trust and confidence in the sector.
‘We are disappointed that this year’s FRC audit quality inspection results were below the high standards we are committed to achieving on all of our audits. Supporting our teams to deliver high quality audits consistently is the primary objective for our audit business.’
The ongoing criticism of the Big Four audit firms has seen PwC roll out a wide-ranging programme to enhance audit quality with the recruitment of an additional 500 people, and further investment in training and technology.
Business growth has been driven by cyber, data and digital service, and particularly strong growth from clients in the technology, media and telecoms, consumer markets, financial services, and energy, utility and infrastructure sectors.
‘At a time of considerable uncertainty, PwC continues to make a significant contribution to the UK economy. Professional and business services is the fastest growing sector in the economy, accounting for 11% of UK GDP, and the largest contributor to services exports. Maintaining this position for the UK and our business is critical,’ Ellis said.
‘We have intentionally shifted gear to make a bigger contribution to addressing the UK's social mobility challenge by creating more job opportunities in less prosperous parts of the UK and by redoubling our efforts to become a top social mobility employer.’
‘As one of the UK’s biggest employers we have taken action to create more opportunities and reach communities across the country. Some 103,000 people applied to join us at all levels - school leavers, graduates and experienced hires - and we welcomed more than 4,000 new joiners. We also took on our first cohort of 111 tech degree apprentices at five universities across the UK, giving young people from a broad range of backgrounds the opportunity to build a career in technology.’
Continuing to follow through the decision to reduce its dependence on a London centric workforce, the firm has focused on building its regional offices. Belfast is the firm’s second largest UK location after London, with 2,300 staff based out of Northern Ireland and plans to move to new and larger offices as demand for PwC’s Operate business, which delivers large operational and managed service solutions to meet regulatory, risk and compliance challenges, remained high. The firm also opened a new office in Bradford as well as new Technology Labs in Reading and London in the last year.