PwC annual report shows increased demand due to uncertainty

PwC’s annual report has revealed positive results for the professional services firm, which has seen higher demand than expected from clients seeking help due to uncertainty created by volatile global markets and digital transformation.

The firm has increased its UK revenue, which includes revenues for PwC Middle East, by 12% to £4.2bn for the year ended 30 June 2019.

Within that, 21% of the firm’s revenues came from technology related services in the face of what PwC chairman and senior partner Kevin Ellis described as the ‘fourth industrial revolution’.

“In the face of uncertainty and the fourth industrial revolution, clients sought our support to transform their businesses, with 21% of revenues this year coming from technology-related services,” he said.

“We experienced high demand for our core services and, in particular, for technology-related solutions. Against a challenging political and economic backdrop our performance reflects our commitment to delivering for our clients and making continual investment in our people and our business.”

Cause for optimism

According to the report, the professional and business services industry, which accounts for 11% of UK GDPR and includes accountancy, is making the most out of the uncertainty currently surrounding the UK and global economy, and the digital transformation being experienced in so many industries.

Mr Ellis said that he remains confident in the UK post-Brexit, but acknowledged the risks associated with the UK’s planned exit from the EU. In reaction to this risk, he said that PwC has put “significant work” into ensuring the firm has the “necessary resilience in our own business and the right expertise to support our clients.”

With the accounting industry’s role trending from compliance to advisory, accountants are being asked by their clients to guide them through these uncertain times, but accounting firms themselves are not immune to this change, reflected in PwC’s investment.

The firm has announced £140m worth of investment for the year ahead in people, quality, training, technology and upskilling, and are focused on closing the skills gap in their workforce, with Mr Ellis saying: “We are using these technology tools not only to change how we are working and delivering for our clients but also to bring our own implementation experience to client projects.

“Investment in innovation, technology and upskilling our workforce remain key priorities and we plan to invest a further £140m this year, including £30m in audit quality.”

The investment in audit comes in response to various regulatory reviews into the audit profession, which have heavily scrutinised the Big Four firms, which includes PwC, following several audit scandals that have occurred under the watch of the UK’s largest accounting firms.

Need for audit investment

PwC has said that it is speaking with stakeholders about how they believe the audit profession needs to involve and are aiming to build “trust and confidence” in the sector. The report acknowledged the FRC’s audit quality inspection in July, which found that 25% of assessed audits of FTSE 350 companies were below an acceptable standard, meaning 75% were deemed good or requiring limited improvements.

Speaking on the report, Mr Ellis said: We are disappointed that this year’s FRC audit quality inspection results were below the high standards we are committed to achieving on all of our audits. Supporting our teams to deliver high quality audits consistently is the primary objective for our Audit business.”

Despite this low-quality, PwC’s profit of £1,016bn this year means that partners of the firm will take home an average of £765,000 for the year, a 7% increase from the £712,000 of the previous year, making this year’s figure the highest since 2009.

However, Mr Ellis has warned that profits will slow, and will likely be flat next year, due to the increased investment in audit and other areas.