The decline resulted from a drop in turnover of £108m.
In what was described as a ‘momentous year for the capital markets’, the fall in income was attributed to low-level merger and acquisition activity, uncertainty over regulatory changes and a flat economy. Profits were down by 14% at £378m, a fall of £61m, while average profit per partner fell to £429,000 from £472,000 in 2002.
Kieran Poynter, senior partner and UK chairman, said they were happy with the results given the year’s ‘economic and regulatory factors’ which ‘produced the most difficult market conditions I can remember’.
All service lines suffered, with tax seeing the worst falls. Tax work fell by 12%, primarily due to clients opting to take tax work away from their auditors given the rapidly changing regulatory environment. Audit work also fell by 5%, but corporate finance and business recovery slightly buffered falls with a 2% rise.
Poynter sought to emphasise the difficulty of making comparisons with other Big Four firms, two of which have yet to report this year’s results.
But most are expected to grow partly on the back of acquiring Andersen UK offices, or partners, in the wake of the firm’s collapse last year.
Poynter said: ‘You’ll find there is quite an impact on reported results in comparing the other three firms.’ Big Four firm Ernst & Young last week reported a revenue rise of 8%.
In a bid to cut costs last year, PwC cut staff by 9%, but Poynter ruled out further cuts. ‘We’re recruiting now rather than cutting,’ he said.
On the ongoing changes to regulation, Poynter sounded a word of warning to the world’s regulators, saying he was concerned it could turn into ‘a sort of competition’, with countries’ regulators outdoing each other.
The sale of PwC Consulting to IBM brought in £223m. A total of £58m was shared among PwC Consulting partners through shares in IBM. The remaining profits were retained to pay former partners’ pension annuities (£85m) and cover tax and other costs (£80m).
With the sale of its consulting arm to IBM, Poynter said the firm was now out of the ‘big ticket’ IT and outsourcing field.
The accounts were audited by Horwath Clark Whitehall, who, the firm said, would be proposed for reappointment. PwC reported its UK results for the first time in its history this year after it became a limited liability partnership on 1 January 2003 in a bid to limit its partners liability.
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