PW results say slump is over: Firm's fees from insolvency fall while audit and tax consultancy work rises

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The Independent Online
PRICE Waterhouse, one of the UK's big six accountancy firms, claims its annual results show that the recession is over, with fees from insolvency down while those from audit and tax consultancy have risen.

The firm is also playing down an dollars 8bn writ that it received from Touche Ross, the joint liquidators of Bank of Credit and Commerce International, over its role as auditor of the disgraced bank.

A spokeswoman for Price Waterhouse said the firm was now 'out of the loop' as far as legal action over BCCI was concerned. The firm had not made provisions against a possible claim. Jermyn Brooks, chairman of Price Waterhouse Europe, said the firm would not be able to raise professional indemnity cover for such a huge sum.

Price Waterhouse's income from corporate recovery fell in the year to 30 June, but that from corporate finance held up well as City activity recovered. The firm groups both departments together as earning pounds 53.2m, down 5 per cent on last year, indicating that fees from dealing with bust companies declined even faster.

The audit side, which forms the bulk of all the big accountancy firms' fees, enjoyed a 1 per cent increase to pounds 137.4m, while fees from tax consultancy rose by 4 per cent to pounds 108.8m.

Worst-hit was management consultancy, which suffered a 14 per cent drop to pounds 83.9m. Mr Brooks said management consultancy was one of the first things companies cut during a recession, and that it had suffered a two-year trough during which the firm had cut the division's staff. But Price Waterhouse had started recruiting again in the summer as demand for management consultancy recovered.

Overall, fee income fell by 3 per cent to pounds 383.3m. Ian Brindle, senior partner in the UK, said: 'Low levels of corporate transaction activity and lack of investment by our clients continued to depress the demand for business advisory and consultancy services for most of the year.'

'However, there was a noticeable improvement in activity in the last two months of our financial year, particularly in the financial services sector. While still fragile and by no means universal, this upturn has been sustained in the early months of 1993/4 and has generated some sizeable new work for all our service lines.'

Earnings from Continental Europe remained exactly flat at Sfr2bn (pounds 926m), but management consultancy plummeted by 19 per cent to Sfr306m. Tax consultancy grew by 7 per cent to Sfr513m while audit fees rose 3 per cent to Sfr1.02bn.

Mr Brooks said that while conditions in Germany, for instance, remained difficult the economic situation was by no means as apocalyptic as some commentators suggested.

'The effects of recession in most economies in Europe have continued to affect the demand for our services. While consultancy and corporate finance services have been particularly affected they have been offset by good performances in the areas of audit and business advisory services, corporate reconstruction and tax consultancy.

'Steps have been taken to restructure and rationalise practices where necessary to provide a sound foundation for the continuing development of the combined firms in Europe.'