EY announces steady UK growth on the back of increased investment

EY announces steady UK growth on the back of increased investment

The Big Four firm has continued its investment in audit quality, talent, technology, environmental sustainability and its regional business.

EY announces steady UK growth on the back of increased investment

EY has enjoyed steady UK growth during the last financial year and has continued to invest in several fields while prioritising audit quality, according to the firm’s annual transparency report.

Its UK fee income grew by 1.5% to £2.45 billion during the financial year ending 30 June 2019, and the firm has increased its investment in audit quality to £25m per year.

EY’s revenues in Transaction Advisory Services and Tax grew by 9% and 8% respectively, however its Advisory and Assurance revenues decreased slightly by 3% and 5%.

Steve Varley, EY’s UK Chairman said: “We are very clear about the crucial role that our work plays in building and sustaining trust and confidence in the capital markets and helping to improve the attractiveness of the UK as a centre for business. That’s why it’s important that we have continued to invest in the right places, despite the uncertain economic environment. This year alone we’ve hired over 2,600 people, with more than a third of all roles in our regional business, invested around £31m in training and development, and have made significant investments in our tech capabilities.

“After multiple years of strong UK growth, we have continued to prioritise the infrastructure needed to deliver high quality audits by investing in compliance, our people and new technologies. While there’s more to do, I’m encouraged by the improvements in our latest audit quality scores from the Financial Reporting Council (FRC). The FRC inspections looked at 18 of our audits this year, with 89% of the nine FTSE 350 audits rated in the top category.

“We audit around 5,000 organisations in the UK and are increasing our focus to ensure that every one of these audits meets the highest standards. I’m confident that we are taking the steps needed to build on these results in the future.”

Audit quality

In 2014, EY established a long-term audit quality programme and a dedicated Audit Quality Board, to drive improvements in the firm’s audit activities.

In addition to the £25m it has invested in these improvement efforts, the number of people it has dedicated to its audit improvement work has increased by 25% over the last 12 months.

It has also invested heavily in new technology and training within its audit arm, recruiting around 30% more UK graduates and school leaver apprenticeships than in the previous financial year.

Audit clients of EY include Vodafone, Aston Martin, Intermediate Capital Group, and Brewin Dolphin.

People and diversity

EY’s report also shows the firm taking positive steps to become a more diverse organisation. It has set itself a target to double the proportion of female and Black and Minority Ethnic (BME) partners in its UK business to 40% female and 20% BME by July 2025.

To do so, EY increased investment in its Accelerate and Future Leadership Programme, focused on senior female and BME talent, and CareerWatch, a sponsorship programme for mid-career talent. It also runs a programme called EY Reconnect, which aims to provide a bridge for professionals re-entering the workplace after an extended leave, which helps to attract and retain talent.

In January, EY also launched a guide on domestic abuse, introducing tools and resources provided by Everyone’s Business and a period of special leave.

Varley said: “I’m proud of the steps we are taking to build diverse and inclusive teams. We’ve made positive progress but want to accelerate the speed of change, which is why we set ourselves ambitious new UK diversity targets at the start of the year. We see this as a business imperative and a key part of our future growth.

“Our approach to diversity and inclusion extends beyond gender and ethnicity targets. We’re committed to opening the doors of the profession to a broad spectrum of talent. In recent years we’ve launched new apprenticeship programmes such as a digital degree apprenticeship. This year alone we hired 918 graduates and apprentices across the UK.

“Our charity, the EY Foundation, also continues to grow from strength to strength. The Foundation worked with 4,061 young people and 322 employers this year, expanding to three new locations in Liverpool, Stoke and Wolverhampton.”

Technology

In addition to its investments in audit quality, EY has continued to invest in technology, investing over £32m in the UK. Globally, as part of the firm’s plan to invest US$1bn over two years in new technology solutions and capabilities, EY has been both adapting traditional services and launching new ones with technology.

To improve how it will manage its client engagements, EY has invested in a globally integrated SAP programme called Mercury, and have said that this IT transformation programme is one of the largest of its kind globally. This is intended to help EY plan, budget, resource and track client projects using data and processes. It should also contribute to higher levels of audit quality by enabling more informed planning and pricing decisions.

The firm has also launched new technology-enabled services for its clients. One such example is EY TaxChat, which is an on-demand service that will help customers complete their UK Self-Assessment tax returns, combining a digital platform with advice from EY tax professionals.

EY is also helping clients in the public sector. In collaboration with Xantura – a data sharing and analytics company – the firm is supporting local councils to address how they can better provide early support for vulnerable individuals, whether that be in adult and children’s social care or homeless services.

The Big Four firm has also developed a tool that helps healthcare providers and biopharmaceutical companies to create, manage and analyse their contracts. Employing blockchain and cloud technologies, the tool uses data to evaluate the effectiveness of medical treatments and manage ‘Health Outcome Contracts’ which are widely used in the sector.

Other investments

Of its 2,600 new UK recruits, 31% are based in EY’s regional offices, and 55% of its graduate and student hires were based out of London. The firm also announced growth plans for its Scotland practice in May, which aims to grow the staff in its Scottish offices by 25% for 2020.

The firm is also investing in the environment and has taken steps to reduce plastic consumption across all its UK offices. For example, all heating and hot water in buildings where EY purchases its energy from utility providers is generated using 100% certified renewable biogas.

Future Growth

Speaking on the future for EY, Steve Varley said: “I am feeling very optimistic about the future health and growth of our business. The economic environment over the next 12 months is likely to be challenging, as the UK economy adjusts to life outside the EU, but I’m confident that we have a resilient and flexible UK business that is well-placed to adapt to a slower growth economy and is also able to draw on the strengths of EY’s global network. We have robust plans in place for our own business and remain focused on supporting our clients.

“We will also continue to play an active and constructive role in the current reviews into corporate reporting and the audit profession. We recognise the importance of the current dialogue around the profession and its regulation and are committed to ensuring that we continue to evolve to best serve business, investors and other public interest stakeholder needs. We believe the right set of comprehensive changes is needed to address corporate reporting, the scope of the audit, a strengthened regulator, and the accountability and regulation of both auditors and company directors.”

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