The proposed change is expected to result in up to 440 exits if redundancies continue.Bloomberg reported, citing a memo sent to employees and people familiar with the matter, that the affected employees were informed that they could be laid off, after formal consultation.
Up to 440 audit exits are possible after consultation
According to Bloomberg, the proposed cuts are focused on qualified assistant directors of accountants and affect approximately 6 percent of KPMG’s 7,100-employee audit department in the United Kingdom.KPMG UK confirmed on Saturday that it plans to reduce headcount in its audit business, after Bloomberg first reported the potential scope of the move.
However, the company did not specify how many jobs would eventually be cut.KPMG UK said the decision was driven by unusually low staff turnover in parts of its audit practice.“Current market conditions mean that our attrition rates are very low within certain parts of our audit group, which is why we propose right-sizing those areas,” a KPMG UK spokesperson said in a statement to Bloomberg.“This is not a decision we make lightly.”
The Financial Times reported that consultations on audit cuts are expected to continue until mid-May.
The consulting arm is also facing new layoffs
According to the Financial Times, KPMG has separately told staff in its consulting business that it plans to cut around 120 jobs, while hundreds more could also be considered for possible redundancy.Most of the consulting job losses are expected to be in the enterprise risk department, which advises companies on governance, risk and compliance. Some back-office roles and staff in the economic team are also said to be affected.One person familiar with the advisory cuts told the Financial Times that the latest round was “absolutely devastating”, especially for staff who had already gone through similar turmoil last year.The Financial Times quoted another person as saying that senior leaders were under pressure to meet budgets during a long slowdown, saying that the company had hired a “large number” of unhired consultants for about six months and had seen fewer projects underway.The changes will affect just over 2 percent of consulting business, a separate person said.KPMG confirmed that it is “launching proposals to reduce roles in some areas” for its consulting arm.“While the company continues to grow in some areas, we are always looking at what our business looks like to keep up with customer demand and support sustainable growth,” the company said, according to the Financial Times.
The advisory slowdown and move to artificial intelligence add more pressure
The job cuts highlight ongoing pressure across professional services firms, which are trying to rein in costs following a sharp post-pandemic expansion and subsequent slowdown in demand for consulting work.Other major companies have also turned to layoffs. McKinsey & Co. has discussed cutting about 10 percent of employees in non-client-facing teams, which could amount to several thousand jobs over the next 18 to 24 months.KPMG’s latest move comes as companies across the sector try to adapt to weaker customer demand while also reshaping their operations for an AI-driven environment.KPMG’s audit cuts are somewhat unusual because the previous four major rounds of redundancies were generally concentrated in consulting or support functions, given the more stable nature of the audit work. However, low attrition has swollen the number of junior staff, and PwC cut 175 junior auditors last year, the newspaper reported.
Earnings rise despite weak advisory performance
KPMG employs around 16,700 people in the UK. While the company doesn’t break down employee numbers by department, the consulting arm accounts for nearly half of annual sales.According to the Financial Times, KPMG’s consulting business shrank by 3 percent last year, in line with falling revenues at consulting units at EY, PricewaterhouseCoopers and Deloitte, even as the company’s overall profitability improved.KPMG’s pre-tax profits rose 14 per cent to £576m last year, which the company attributed to “careful cost management in response to the economic cycle”.UK CEO Jonathan Holt, who recently lost the race to become KPMG’s next global head, has been working to boost profitability by cutting costs, freezing pay and promotions, and reducing headcount. It added that UK partners earned an average of £880,000 for the 12 months to September, an 11 per cent increase, and the first time in more than a decade that KPMG’s UK partners were paid more than those at PricewaterhouseCoopers and Ernst & Young.