Overstaffing at KPMG causes profits to plummet

Misplaced optimism over the nation's faltering economic recovery has dented the fortunes of "Big Four" accountant KPMG, which revealed falling UK profits today. The accountant blamed hanging onto staff too long for the 13 per cent fall in UK profits to £349m in the year to October.

KPMG's senior UK partner Simon Collins said: "Our profitability fell because of investment and because we maintained high staff levels in some areas of our business in anticipation of a wider economic recovery that failed to materialise."

The company – the nation's third-biggest accountant behind PricewaterhouseCoopers and Deloitte – was forced to make 275 of its 11,000 UK staff redundant over the summer.

The firm, which counts FTSE 100 mining firm Kazakhmys and haulage group Stobart among its audit clients, grew UK revenues 4 per cent to £1.77bn. KPMG also handled some high-profile administrations including ill-fated retailer JJB Sports, and the UK division of MF Global, the broker run by former Goldman Sachs boss Jon Corzine which blew up in spectacular fashion last year.

The company took on 650 graduates and 150 students last year. Mr Collins added: "We continue to invest for the future. There are signs that market conditions are improving slowly, and the first few months of our new financial year have been encouraging."