PwC partners’ pay dips after Brexit dents profit
PwC posted record UK revenues of ￡3.6bn in the latest financial year but said the fragile business environment following Britains Brexit vote had dented profits and triggered pay cuts for senior executives at the accountancy firm.
The 5 per cent rise in revenues year-on-year was driven by growth in PwCs consulting and tax divisions, both of which reported revenue rises of 7 per cent. Assurance — traditionally the most important part of accounting firms’ business — posted lower growth of 4 per cent.
Revenues in the deals division, which provides companies with strategic advice on mergers and acquisitions, fell 1 per cent. Kevin Ellis, chairman of PwCs UK business, blamed this slowdown on old contracts winding down and said the transaction services team had been “very busy” throughout the year.
Profits also fell 1 per cent to ￡822m, contributing to an 8 per cent fall in profits distributed to each of the 953 equity partners at the firm. This brought the average profit per partner down to ￡652,000 — significantly lower than the ￡865,000 figure for equity partners at rival Deloittes UK business this year.
Mr Ellis said profits had been hit by uncertainty among clients in the six months following Britains vote to leave the EU in June 2016, although business activity improved in 2017.
“This is a strong set of results from what we found to be a tough set of conditions following Brexit,” he said. “We have now moved on and have seen a pick-up in the [first six months of 2017], which was better. By [January] it does appear that the log jam moved on and businesses were more active.”
He added that an increase in the number of equity partners, and the firms decision to invest in technology such as artificial intelligence, drones, virtual reality and blockchain, also contributed to the fall in profits per partner. “The income is down — whether you call it a pay cut or an investment [is up to you],” he said.
“Our partners are very keen on driving our strategy forward. We have launched a blockchain business in Belfast, and a technology hub in Reading — these are all start-up businesses that we did not even know we needed two years ago. We have to put the money in now to remain relevant,” he said.
Pay for Mr Ellis, who was elected chairman and senior partner of PwCs UK business in April 2016, was ￡3.1m in the most recent financial year, compared to ￡3.8m for his predecessor the year before.
He said the biggest challenge for the firm this year would be making sure it was investing in the right areas and “hoping you get these investments right”.
He said: “This is not necessarily keeping me up at night, but when youre making a lot of investments it is exciting and exhilarating but also uncertain — not everything will work. A lot of things we have done in the technology space we have had to stop.
“It is a challenging environment — the most important thing for us is making sure its an environment that keeps our people wanting to be an accountant and in the profession. We want the brand of being an auditor to be as exciting and as popular as it has been in the past.”