PwC’s annual revenues held back by sluggish client spending

PwC’s revenues in the Americas were flat last year as the audit firm was hit by a spending shutdown by clients at the start of the pandemic. The consulting group’s global sales rose 4.9 per cent to $45.1bn in the 12 months to June 30, only increasing because of a […]

PwC’s revenues in the Americas were flat last year as the audit firm was hit by a spending shutdown by clients at the start of the pandemic.

The consulting group’s global sales rose 4.9 per cent to $45.1bn in the 12 months to June 30, only increasing because of a surge in corporate activity as economies reopened in its final quarter.

Bob Moritz, global chair, said PwC’s business in the Americas, its largest region, was particularly susceptible to clients cutting back on costs because it relied heavily on discretionary spending by companies.

The results mirror those of PwC’s rival EY, which also reported more sluggish growth in the Americas than elsewhere. PwC’s sales in the region rose just 0.1 per cent to $18.3bn, a weaker performance than EY, which increased revenues there by 2.8 per cent over the same period.

The weakness was explained partly by a one-third reduction in pass-through costs such as business travel, which would normally be billed to clients in full.

Moritz said the group would “watch carefully the correlation between remote [working] and [audit] quality,” following PwC US’s decision to embrace full-time remote working on a permanent basis.

PwC US, which failed to increase its revenues last year, announced last week that it would allow its 40,000 client-facing staff to work permanently from anywhere in the country in an effort to improve employee recruitment and retention.

“We think the last 18 months have proven that it doesn’t deteriorate the quality of the work, and therefore why take it off the table?” Moritz said.

The US decision is at odds with previous statements by Kevin Ellis, PwC’s UK chair, who said last year that auditing “becomes much harder down a Zoom lens”.

PwC fared better in Europe, the Middle East and Africa, where revenues rose 8 per cent to nearly $18bn. In Asia-Pacific, where the group plans to double its business within five years, sales jumped 9.4 per cent to $8.9bn.

However, the regional growth figures were flattered by exchange rate fluctuations, increasing 2 per cent and 6.2 per cent, respectively, in local currency. Globally, sales increased only 2 per cent when foreign exchange movements were stripped out.

The results follow a strategy and rebranding announcement by PwC in June when it pledged to increase its headcount by 100,000 and invest $12bn in its business over five years. That plan also included the creation of “trust leadership institutes” to train clients in business ethics and environmental, social and governance issues.

Moritz said that PwC would increase transparency in its own reporting, and was “assessing” whether to disclose its profits in future. PwC and the other Big Four accountants — Deloitte, EY and KPMG — do not publish global profit figures, making their performance difficult to assess.

In the UK, where they are legally required to disclose their profits, PwC reported a 2 per cent rise in sales last year but pre-tax profit jumped 25 per cent to almost £1.2bn.

Moritz said the exposure of the extensive use of offshore tax havens by wealthy individuals and political leaders aided by advisory firms, in the recent leak of financial data dubbed the “Pandora Papers”, was a “concern” for the industry’s reputation.

Asked whether any PwC advice had been included in the leak, he said: “We’re not aware of anything at this point in time, but . . . it was recent and so the review of that is under way.” He added: “It’s up to each organisation to make sure that we are doing what is ethically responsible and legally responsible.”

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