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PwC grows 7%, but partner profits drop

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17th Sep 2012
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The UK and Middle East wing of Big Four firm PwC reported a 7% increase in its fee income to £2.6bn for the year to 30 June 2012. Profits for the year were up 10% to £727m, but individual partners saw their actual profit shares drop £28,000 from last year to £679,000.

The UK’s biggest accountancy firm continues to defy stagnation in the wider economy. Chief Financial Officer Keith Tilson commented: “Growing revenue by 7% in such a difficult economy is a significant achievement and testimony to our strategy and investment through the downturn.”

While rival firm KPMG announced the likelihood of 3% staff cuts  last month, PwC has taken on 2,300 staff during the past year, including more than 1,300 graduates and school leavers.

The firm’s various practices made the following contributions to the total fee income for the UK and Middle East, with growth rates in brackets:

  • Assurance £963m (up 6% from £909m in 2011)
  • Tax £659m (up 2% from £645m)
  • Deals (business recovery, corporate finance etc) £561m (up 8% from £518m)
  • Consulting £438m  (up 13% £389m).

“We continue to see high growth potential for our consulting, risk assurance, forensic and actuarial businesses, as well as our Middle East firm,” said chairman Ian Powell in the firm's results announcement.

The firm’s assurance practice was boosted by audit wins including Aviva, Dubai World, Genel Energy and Yule Catto.  Showing a renewed enthusiasm after a decade under the restrictive Sarbanes-Oxley Act, consulting continued to shine with 13% annual growth driven in part my new service lines addressing sustainability and climate change services.

Out of the total profit for the year of £727m (2011: £656m), the amount available for division among members was of £672m (up 8% from £622m last year). The average profit per partner disclosed in the accounts increased from £763,000 to £798,000, but deductions to cover annuity payments to certain former partners other equity adjustments brought the distributable profit per partner down 4% from £707,000 in 2011 to £679,000 for this year.

PwC’s 64-page annual report 'Doing The Right Thing' is a good showcase for the firm’s corporate aspirations, with roughly half of the content devoted to non-financial information on topics such as corporate governance, risk management, sustainability and diversity. “Our ambition is to become the iconic professional services firm, always front of mind whenever professional services are mentioned,” the firm commented, describing itself as “a powerhouse of a commercial  enterprise that does the right thing for our clients, our people and our communities”.

Given the political climate and controversies surrounding tax avoidance, an entire page is devoted to the amount of tax paid by the firm during the year - a total of £975m in 2012 (up from £900m in 2011), itemised in terms of amounts paid in corporation tax, partners’ contributions, income tax and VAT.

With upper rate income tax due on amounts over £150,000, plus 2% in NICs, the average effective tax rate for LLP partners in 2012 was approximately 47% compared to 46% last year, the firm said.

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By wilcoskip
18th Sep 2012 09:22

Wow.

It's a different world....

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By Ron Banerjee
18th Sep 2012 11:09

Good stuff

It is a different world wilcoskip. I have to say being ex-PwC I am happy to see them doing well although that life was not for me.  

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Replying to tom123:
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By wilcoskip
18th Sep 2012 11:14

Absolutely

Good on them - I'm sure they work really hard for what they have.  I nearly jumped into a big 4 firm myself once, but I doubt it would have worked out well.  I know myself well enough now to realise that I'm just not a Corporate person - I'm much happier in a small firm or (as I am now) running my own one-man practice.

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By Lancsboy2
21st Sep 2012 22:38

my deloitte mate earned 350k last year ....

.... and i want to catch him up!  

 

sadly i feel i may be on a losing bet .... but i reckon by year #10 i should be on £1m fees @40% margin .... not bad. we'll see!  

 

big 4 partner income is skewed in favour of the london / sexy clients - mean average partner wages are much lower than £679k.

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By malcolm141
24th Sep 2012 15:08

Interesting

Having done some reading on Positioning for professional firms I read the headline of growth of 7% but lower partner profits with a vision to be the biggest by fee income and wonder if this is a viable strategy.

Market share doesn't equal profit share...perhaps all of us need to think about this?

Malcolm

Accountants North London

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