KPMG restructures partner pay as profits leap 27%

PARTNERS at KPMG received a boost in pay as the Big Four firm reported a 27% increase in UK profits for the 12 months to the end of September.

The jump in income, which saw average earnings for KPMG’s 583 partners increase to £713,000, from £580,000, meant the firm was able to hold back part of this year’s profits for investment in its services, while also restructuring the way its partners are paid.

“We changed the partner pay model so that it is much more about medium term profit across the firm,” Simon Collins, KPMG’s senior partner and UK chairman who took more than £2.4m, told Accountancy Age.

That money will be used as part of £450m the firm plans to invest in the UK over the next three years, with technology, which Collins described as the “golden thread” running through the firm, being the main beneficiary.

In November the firm launched a £74.8m investment fund, KPMG Capital, to invest in the tech sector, and recently signed a deal to create a new tech centre in Leeds.
The firm already has strong links with the UK’s early-stage tech companies through its team, set up in December 2012, dedicated to serving businesses clustered around Old Street roundabout in Tech City.

“There are similar developments in the pipeline,” Collins said.

The hike in profits came despite turnover remaining flat at £1.8bn and follows the “first and toughest year” of a three-year turnaround plan at the firm, which saw KPMG slash 275 jobs – about 3% of its workforce – as part of a review across its entire business.

“We are starting to see the operating benefits of that,” Collins said. “There were some outright savings and we are making much better use of resources.”

Advisory services posted a 15% increase in profits to £308m from £268m, while audit saw the largest increase in contributions, up by 16% to £178m. KPMG’s audit arm was recently boosted by picking up the audits of Unilever and Berkeley Group from PwC, having previously lost its audit of HSBC to the same firm.

Earlier this year, the Competition Commission imposed rules that require FTSE 350 firms to put their audits out to tender every ten years.

“We see ourselves winning from the shake-up,” Collins added.

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