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October 27, 2009

Big Four global revenues on the slide as downturn felt worldwide

Ernst & Young (E&Y) and Pricewaterhouse-Coopers (PwC) describe the past 12 months as challenging as both reported substantial US dollar losses in global revenues for 2009.

PwC, the world’s largest accounting network, dropped revenue by 7 percent to $26.2 billion in US dollars in the year to 30 June 2009. E&Y also reported a 7 percent drop in revenue to $21.4 billion for the year ended 30 June 2009. PwC reported its total gross revenues rose slightly at constant exchange rates for the fiscal year, while E&Y said that in local currency terms its year-on-year revenues decreased by less than 1 percent.

For the fiscal year 2008/2009, E&Y decided to eliminate including fees billed from within its network in an effort to harmonise its policies across member firms as part of its globalisation efforts. Eliminating inter-firm billings shaved $1.5 billion from E&Y’s previously reported 2008 FYE revenue, which was reported as $24.5 billion.

PwC global operations leader Paul Boorman said weak worldwide trading conditions was a major reason for the below par results.PwC and Ernst & Young annual revenue 2005-2009

“Our results were not as good as we would have liked of course but many of our firms held up well under the circumstances,” Boorman said.

An E&Y spokesperson said network leaders were still pleased with the results due to challenging market conditions.

“Flat revenues don’t tell the whole story of this year. We invested in people, in building markets as part of our globalisation strategy, and in being sensitive to the issues our clients faced,” E&Y said.

The networks said service line revenues were impacted by pricing pressure and fee reductions.

The recession had less of an impact on PwC’s assurance services as it grew by 2 percent to $13.1 billion. E&Y said it managed to offset most of the pricing pressure and fee reductions by market-share gains although its assurance revenue still decreased by 1 percent.

E&Y grew tax revenue by 2 percent while the fee income of PwC’s tax service line remained flat.

Advisory services were the hardest hit for PwC, as revenue dropped 3 percent to $6.1 billion. E&Y said its risk management and performance improvement services had a sustained demand, which resulted in advisory services increasing revenue by 2 percent.

Despite the downturn, both E&Y and PwC have continued to grow staff numbers. E&Y hired 37,800 people, which includes 29,000 permanent staff and 8,800 interns, and PwC hired 30,000 new staff members worldwide, increasing its total headcount by 5 percent to 163,000.

Large firms in both networks made cutbacks throughout the past year, most notably to struggling corporate finance divisions.

“Economic conditions have forced some staff cut backs in places but all of our firms work hard to maintain staff levels, so we are well positioned to go forward when we come out of a recession.” Boorman said.

“Our main focus has been to successfully sustain a business and retain the people we need through the difficult period to give us that strong platform [we need] to continue serving clients in the recovery and to start to invest in our own growth.”

Deloitte, with a May year-end, has yet to report its global revenue for the 2009 fiscal year, although the network’s largest firm reported a 3 percent revenue decline. A Deloitte spokesperson said the network aimed to release its results by the end of the month. If Deloitte manages better than a 4 percent contraction in combined global revenue in US dollar terms, it will overtake PwC as the highest-earning network.

KPMG’s financial reporting period ends on 30 September 2009 and the network rarely releases figures before December.

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