Grant Thornton slashes partner pay

News of the average profit per equity partner at Grant Thornton falling from £343,000 in 2018 to £323,000 in June was revealed this week in an interim transparency report released by the firm. 

Grant Thornton released the interim report after deciding to adjust its financial year from 30 June to 31 December as a later year-end “better matches the seasonality of our business” and aligns with their global reporting committees. 

The Financial Times noted that this is the first time in 15 years that Grant Thornton has not published their results before the end of the year.  

Grant Thornton’s audit division took the same downward trajectory as partner pay, with 2018’s profits of £13.5m dwindled to £5.4m. However, the total audit fee income of £131.7m remained relatively unchanged from the previous year’s £132.4m. 

The downbeat outlook at Grant Thornton is in stark contrast to the“landmark year”, its nearest rival BDO proclaimed last month. Not only did BDO leapfrog Grant Thornton into the hotly contested fifth position but it announced an increase in revenues by 25% to £578m.

Likewise, BDO’s increase of the average distributable profit per partner by 8.7% to £602,002 is likely to further rub salt into wounds for Grant Thornton’s pay-cut equity partners.

It wasn’t all bad news at Grant Thornton as the total revenue saw moderate growth from £490.8m to £501.8m - but that still sits in the shadows of BDO. And while partner numbers inched up by 12 to 200, Grant Thornton's CEO David Dunckley had previously announced restructuring plans which have earmarked 60 administrative staff redundant and sent 6% of partners walking. 

A year of woes

The embattled firm’s woes started when Sacha Romanovitch left her position as CEO amidst leaks of an internal coup. 

The anonymous internal attack pointed fingers at Romanovitch’s “out of control” leadership style and accused her of having “a socialist agenda”. What caught the ire of the small cadre of partners was an overhaul of the partnership structure which shifted towards a profit-sharing scheme for all staff. 

With Romanovitch out of the picture, David Dunckley rose to prominence. But the woes continued with Grant Thornton coming under scrutiny for its audits of the bakery chain Patisserie Valerie and retailer Sports Direct. 

Unlike BDO who has received “unprecedented” audit interest and has pledged to invest £20m in this division over the coming year, it’s in audit that Grant Thornton has taken its biggest hit. 

The underwhelming interim results can partly be attributed to Grant Thornton taking the “strategic decision” last year to “move away from tendering for statutory audit work in the FTSE 350” until there was a “shift in the competitive landscape”.

In the forward Dunckley remained resolute on the need for change in the audit industry. 

“For the market to become more competitive, we have firm views on the changes required, and we have been consistent on these views in the last year.

“We need time to invest further in our capacity to do more, larger audits. An environment where larger firms are split between non-audit and audit will hamper our ability to invest and is likely to be a disincentive for challenger firms to seek to operate in the large listed company audit market.”