Viewpoint: Is John Connolly serious?

How seriously should we take John Connolly’s claim that Deloitte plans to hit
£2bn in revenues in two years?

Connolly has, after all, a track record of making bold claims.

He said in 2003 that Deloitte could overhaul PwC in two to three years, a
move that has not materialized.

So why should we believe it now?

The £2bn figure seems in some ways unimaginably high, especially as Ernst
& Young, the smallest of the Big Four, will, all things being equal, only
hit the £1bn figure this year.

A look at the numbers suggests it is not necessarily that bold a claim.

A 20% growth rate over two years would take Deloitte to £1.95bn, just short
of the magic £2bn.

KPMG grew at 20% in 2005, whilst E&Y’s first half revenues for this year
grew at 21%, so the numbers are not implausible.

What is perhaps surprising is Connolly’s claim that Deloitte can match its
rivals, and even exceed them. Deloitte grew at 8% in 2005, and announced growth
of 15% for the first half this year.

Whatever happens, Deloitte insists and will continue to insist that its
higher profitability matters more. Chairman Martin Scicluna recently said that
was the key number to look at.

The other firms may claim their revenues are higher, and Mike Rake has
already said KPMG expects to overtake Deloitte ‘in the next couple of years,’
but can they answer the charge that, ultimately, Deloitte partners earn more?

Apart from anything else, Connolly’s comments continue a trend of robust
remarks coming from the Big Four, exposing competitive sides that, Connolly
apart, we had not seen much of before.

In fathoming how seriously to take the claim, and working out where the top
end of the accounting market is going, the essential question must be: where is
the growth coming from, and who will profit most from it?

A tide of regulation has seen revenues soar, with growth across the board.
But M&A activity is increasingly playing a role. Insiders say advisory
revenues, the catch-all term for extra services provided to over-burdened CFOs,
are a huge growth area too.

Who has the best people to provide those services, and drive revenues upward?

It’s difficult to say, but it will be fascinating finding out.

To read Accountancy Age’s interview with Connolly go to To read the Rake interview go to

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