KPMG British earnings collapse by 25%

KPMG, one of the Big Four accountancy firms, yesterday said it had one of its toughest ever years due to grim market conditions, in which British partners at the firm saw their earnings collapse by almost 25 per cent.

The UK part of KPMG said underlying pre-tax profit fell 21 per cent to £212m in the year to 30 September, with income from tax advisory work and corporate finance suffering most due to the grim economic conditions. Fees from corporate finance dropped 7 per cent to £83m.

Some parts of the business benefited from the turbulent economic climate, with fees from the assurance department, which includes audit, rising 3 per cent to £421.5m. Revenue at KPMG's corporate-recovery business, which assists businesses with insolvency and restructuring, rose 13 per cent to £82m, from £73m.

KPMG's 600 UK partners saw their average earnings fall to £352,000 each from £462,000.

Mike Rake, the chairman of KPMG in the UK, said: "Restructuring, redundancy and higher people costs have affected our level of profitability. Tough trading conditions and a downturn in the financial markets made this a difficult year for everyone."

KPMG said it had made 1,000 partners and staff redundant last year due to the reduced demand for its services. It now has 9,500 UK employees and said it had "no plans" at the moment to cut its headcount further.

Accounting firms have posted the slowest revenue growth in more than a decade in the past year, hurt by a slowing global economy which has reduced company spending on advisory work. A year ago, KPMG's UK revenue rose 18 per cent.

KPMG sold its consulting business in July to the Dutch group Atos as part of the industry-wide shift towards separating this type of business from audit work due to concerns in the market about potential conflicts of interest.

KPMG and the other big auditors – PricewaterhouseCoopers, Deloitte Touche Tohmatsu and Ernst & Young – are still awaiting a decision by the Government on how much more separation has to take place.