PwC set to become smallest big four firm
PwC is likely to be the smallest of the big four accounting partnerships at the end of the financial year, after more than 200 partners left the once-ascendant firm following its tax leaks scandal.
PwC chief executive Kevin Burrowes expects the partnership to settle at about 650 partners following a promotion round in July, compared to 882 at the same point last year. That would position it below KPMG, the smallest of the big four, which had 713 partners at the end of the last financial year.
PwC’s chief executive Kevin Burrowes expects the partnership to have about 650 members in July, down more than 200 from a year prior. Alex Ellinghausen
Australia’s highest earning firm in 2023, PwC’s revenue could dip below that of KPMG, with the firm hit by the firesale of its government consulting business and a depressed consulting market.
Despite the anticipated fall in revenue, the success of a $100m cost-cutting exercise – which carved more than 30 partners and 300 staff from the organisation – is expected to deliver better than expected profit distributions to the remaining partners.
“There have been economic headwinds for the whole profession … so it was appropriate for us to make sure the firm was properly managed. That’s a core part of our strategy,” Mr Burrowes said.
Unfortunately, we had to let some people go. That’s always very, very difficult, but it’s the right thing to do to make sure we can invest in the future, invest in promoting our partners and invest in new capabilities that we need in order to have a well run business,” he said.
About 100 partners left PwC to join public sector consulting spinoff Scyne, while up to 37 were pushed into early retirement in the latest round of cuts. Firms as varied as DXC Technology, law firm Ashurst and commercial real estate agency Cushman & Wakefield have picked up PwC partners since the beginning of this year.
Big four rivals have largely stayed away, but KPMG swooped on senior tax partner Josh Cardwell last month.
Audit, tax focus
As part of a new three-year strategy released on Friday, the firm will refocus on its core tax and audit capabilities, which have held up in the face of severe disruption to its consulting arm.
After losing a string of audit clients at the height of the scandal, new clients have begun to return to PwC, with services contractor Downer EDI signing on earlier this month after a dispute with KPMG.
But fears remain within the firm that lucrative clients such as Macquarie Bank, which is currently reviewing its audit arrangements, could follow Westpac in moving on from PwC.
Mr Burrowes declined to comment about specific clients, but said he was “very happy” with the performance of the audit division, which, he said, was attracting new business.
“We’ve got a high-quality audit practice, and we’ll keep on serving our clients where those clients wish to carry on,” he said.
Consulting uncertain
The status of the consulting arm is more uncertain under the new plan. Hollowed out by the loss of 100 partners to Scyne and numerous cuts to remaining staff, PwC is targeting technological transformation and artificial intelligence as new markets for its advisory division.
“There’s a huge amount of reinvention work companies will have to do, and our cloud and digital consulting skills will be right at the core of that,” Mr Burrowes said.
But Mr Burrowes conceded PwC faced challenges in rebooting its consulting business: “Clearly, if the economic position changes a bit that may help. It’s a tough market for everybody at the moment, but I’m very positive about the outlook for advisory”.
The new strategic plan was accompanied by the election of six new members to its governance board. The partners – Emma Hardy, Ewan Barron, Ian Hockings, Marcus Laithwaite, Michael Fung and Rosalie Wilkie – will join the board in July.
PwC committed to appointing independent directors to its governance board following the Switkowski review into the firm’s governance and culture, and said the recruitment process was “well underway” ahead of a July deadline.
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Maxim Shanahan is a professional services reporter at the Australian Financial Review. Email Maxim at max.shanahan@nine.com.au
