EY revenue slows as consulting business stagnates

EY’s global revenue grew at the slowest pace in more than a decade last year amid a sharp slowdown in its consulting business.
The Big Four firm’s army of accountants and advisers brought in record fees of $51.2 billion in the 12 months to the end of June, a 3.9 per cent increase on the $49.4 billion of revenue that EY reported in its previous financial year.
“Over the past year, EY teams have demonstrated extraordinary resilience in a challenging economic climate,” Janet Truncale, the global chairwoman and chief executive of EY, said. “This resilience is driven by sustained investment in EY capabilities through a broad spectrum of services, such as leading artificial intelligence and tech.”
The slowdown was most keenly felt among EY’s consultants, who have consistently been the driver of the firm’s growth over the past decade.
However, clients around the world have cut back on their spending over the past year, given the uncertain economic and geopolitical outlook. EY’s fees from consulting services stagnated last year, inching up just 0.1 per cent to $15.6 billion.
A continued dearth of initial public offerings and mergers and acquisitions meant that the strategy and transactions business brought in fees of $6.2 billion, a year-on-year increase of 2.3 per cent.
Instead, it was the less exciting but more reliable audit and tax businesses that drove the growth. Revenue in the audit and assurance unit — EY’s largest division — climbed by 6.3 per cent to $17.3 billion, while the tax arm also grew by 6.3 per cent to $12.1 billion.
In response to the lacklustre growth, EY trimmed its workforce for the first time in 14 years. In its annual report, the firm said it employed 392,995 people around the world, down from 395,442 this time last year.
Most of the job cuts came in its dealmaking, tax and consulting business lines. By contrast, it increased the number of auditors it employed over the past 12 months.
EY is one of the world’s Big Four accounting firms alongside Deloitte, KPMG and PwC. Its roots date back to 1849 when Harding and Pullein, a small accountants, was founded in England.
Carmine di Sibio, Truncale’s predecessor, had tried to split EY into separate audit and consulting businesses, freeing the consultants, who were flying high at the time, from the slower-growing audit division. The move, codenamed Project Everest, collapsed amid infighting 18 months ago.
In terms of regions, EY’s weakest performance was in Asia, where professional services firms are contending with a sluggish Chinese economy. Fees from that part of the world flatlined last year at $7.2 billion.
The firm grew 2.7 per cent in the Americas, its biggest region, and 6.9 per cent in Europe, the Middle East, India and Africa.