EY has reported a 5% increase in UK fee income over the past year, buoyed by the firm’s pre-pandemic performance, but average profit per partner has dropped to £667,000 and an additional 10% of partner distributions have been retained due to continuing Covid-19 uncertainty
Fee income for the financial year ending 3 July 2020 was £2.6bn, up from £2.45bn the previous year, with EY noting FY20 benefitted from 53 weeks of results compared to 52 weeks in FY19.
Revenues in strategy and transactions grew 9.4%, tax grew 8.1% and assurance grew 7.8%. EY’s UK consulting practice declined on previous years by 4.7%.
Distributable profits before tax at EY, which is ranked number three in the annual Accountancy Daily Top 75 Firms Survey 2020, increased from £477m in FY19 to £479m in FY20.
However, average profit per partner decreased from £679,000 in FY19 to £667,000 in FY20. In addition, 10% of the partner profit distributions were withheld to bolster the firm against future Covid-19 uncertainty.
Hywel Ball, EY’s UK chair, said: ‘The first nine months saw a strong period of trading. Covid-19 dramatically changed the business environment during the last quarter of our financial year but we continue to take prudent steps to ensure we are well positioned for the future.
‘We have however not used the government’s furlough scheme or lending facilities.’
EY continued to expand its headcount over the year, with 3,000 new hires. The firm appointed 65 new equity partners between 1 July 2019 to 3 October 2020, of whom 26% are women and 19% are from an ethnic minority.
In addition, EY went ahead with its previously announced plans to bring over 1,000 graduates and apprentices into the firm in September this year.
Ball said: ‘I’m proud that we’ve maintained our commitment to student recruitment this year, despite Covid-19, and that we’ve honoured all the conditional offers we made prior to A-level results. At a time of rising unemployment across the UK, we’ve continued to invest in talent across all levels of our business.’
As of 3 October, EY’s UK partnership stands at 23% female and 12% ethnic minority (3% are black partners). Two thirds (64%) of positions on EY’s UK board are also held by women.
In addition, 43% of EY’s student intake in September were female and 41% were from a black or ethnic minority background, up from 39% and 38% respectively last year.
The firm has also published its pay gap figures. EY’s median gender pay gap has improved to 15.3% from 20.1% last year. The firm’s median black pay gap, reported for the first time, is 21.4% and the ethnicity pay gap is 15.8% (13.9% in FY19).
EY said it has increased ethnic minority talent at each level of the firm, with the highest increase of 5% being in more junior levels which now make up 40% of the workforce, a move which has impacted the ethnicity pay gap in the short term.
Ball said: ‘Diversity and inclusion are key priorities for EY and I’m pleased by the progress we are making to improve the diversity of the firm. However, we know there’s more we must do which is why we have introduced more ambitious diversity targets and new anti-racism commitments.’
EY’s UK audit team added 700 staff over the year, and the firm said it has launched a redesigned audit quality strategy. The firm currently audits 24 companies in the FTSE 100 and 72 in the FTSE 350.
Ball said: “In addition to Covid-19, we’ve also continued to work closely with our regulator on proposals for audit reform and have submitted plans for the operational separation of our audit practice.
‘Operational separation is an important stepping stone towards a reformed audit, corporate governance and corporate reporting ecosystem.
‘However, these proposals alone will not deliver all the changes needed. A holistic package of reforms, including improved director accountability and changes to the scope of audit, is required to deliver effective and sustainable change.’
Looking ahead Ball, who took over as EY head earlier this year following the departure of Steve Varley after an eight-year term, said: ‘With a global pandemic, the UK’s exit from the EU, as well as what could be the most significant change to our profession in a generation through operational separation, we are facing a period of significant change.
‘However, I am confident in our ability to thrive through these challenges and we are continuing to make the investments needed for the future and to support our clients and communities.’
