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April 30, 2008

PwC UK loses ground to rival despite steady growth

By Nicholas Moody

PwC UK loses ground to rival despite steady growth

A 6 percent increase in turnover, achieving carbon neutrality and the purchase of new London premises were highlights for PricewaterhouseCoopers (PwC) UK over the past 12 months.

The highest-grossing UK firm announced its turnover grew to £2.1 billion ($4.3 billion) for 2007 financial year end. This was up from £2 billion the previous year but is notably less growth than achieved by its closest rival. Deloitte UK last month reported fee income of £1.8 billion and growth of 15.6 percent – closing the gap to about £300 million from £420 million the previous year.

PwC reported that its net revenue grew 9 percent and profit was up 11 percent to £631 million. Average profit per partner rose 6 percent to £757,000, while the partnership grew to 822 members.

PwC chairman Kieran Poynter said the results demonstrate the diversity of the firm’s business. “The results reflect the demands for an increasingly broad set of high quality services from our clients, with 72 percent of our turnover coming from non-audit services,” he said, while adding that the firm attracted several high-profile clients, including Gordon Ramsay Holdings, Graff Diamonds, LaSenza and William Grant.

Of the service lines, overall assurance turnover remained the top earner and grew 4 percent to £947 million, tax turnover increased 13 percent to £667 million and advisory grew 4 percent to £493 million.

Poynter explained: “Growth in our tax practice was excellent. This was fuelled by a strong transactions market and through particular success in the mid-tier and private client marketplaces, as well as in our human resource services business. Within advisory services, performance improvement consulting grew by 8 percent. Net revenue growth in corporate finance remained strong at 12 percent, reflecting the buoyant transactions market and strong deal flow. But as expected, revenue declined in our large business recovery services unit reflecting yet another year of benign economic conditions.”

The firm has experienced steady growth in non-audit services turnover for the past three years: turnover rose from £828 million in 2005 to £1.1 billion this year, an increase of 31 percent. Audit services grew 20 percent over the same period. Non-audit services to audit clients dropped from £456 million in 2005 to £431 million this year due to a Sarbanes-Oxley tail-off.

As part of the firm’s corporate responsibility initiatives, PwC became carbon neutral this year. It reduced its total carbon emissions by more than 40 percent over the past four years.

“We have achieved this by buying 85 percent of our electricity from renewable sources, improving our space efficiency to reduce heat and light requirements, conducting energy audits to identify problem areas, installing low-energy lighting and, with help from our people, implementing local energy-saving initiatives,” Poynter said.

Investment in phone and video conferencing systems, the provision of interest-free season ticket loans, a Cycle to Work scheme and cycle and shower facilities in many of the offices have also helped the drive towards carbon neutrality.

“We continue to focus on making the right long-term investments to build a sustainable business to meet the current and future demands of our clients. To do this, we have continued an unwavering focus on our people – initiating a range of new programmes to support all of our people in developing their skills and building diverse and challenging careers,” Poynter added.

Another major highlight of the year was the firm’s acquisition of a new London office at 7 More London, due for occupation in 2011.

In the chairman’s report of PwC’s 2007 annual report, Poynter said the firm also supports the development of a robust, high quality regulatory environment – in light of the Financial Reporting Council’s concerns about the UK audit market offering adequate choice to large listed companies. He added that the firm prefers the introduction of legislation to cap auditor liability.

Nicholas Moody

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