Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
KPMG has cut its UK partnership to less than half the size of rival PwC’s, after shrinking its top rank for a fourth straight year against a backdrop of regulatory fines.
The number of equity partners at the Big Four firm, who own the business and share its profits, fell 7 per cent in the year to October to 467 after it failed to elevate any staff to its partnership in its latest promotion round.
The drop pushed the firm’s UK partnership numbers to their lowest level in more than 20 years, giving a bigger proportion of profits to those who remain.
The figures highlight how KPMG’s strategy and fortunes have diverged from the other Big Four firms — PwC, EY and Deloitte — in recent years, after it was hit by a series of scandals and fines, including a record £21mn penalty for failures in its auditing of collapsed outsourcer Carillion.
It is the first time KPMG’s partnership has fallen to less than 500 members since firms began disclosing these figures in 2002.
PwC has 1,057 equity partners, while EY and Deloitte have 930 and 714, respectively, after expanding their partnerships in the past year.
Jon Holt, KPMG UK’s chief executive, is seeking to repair the firm’s reputation and boost profits, which have lagged behind rivals.
KPMG, which is the smallest of the Big Four with about 16,000 staff, has long trailed its competitors on average partner pay. In the year to September 2022, partners were paid an average of £757,000, the highest since the financial crisis.
However, this still fell short of Deloitte, PwC and EY, which paid an average of £1.06mn, £1.02mn and £803,000, respectively, during their equivalent financial years, despite having larger partnerships.
While the size of its partnership has shrunk, KPMG has made dozens of promotions to the rank of “salaried partner”, a job it introduced in 2021 that is not entitled to profit sharing. It now has 359 salaried partners.
The salaried partner role has also been brought in at EY and Deloitte.
Chris Hearld, chief operating and financial officer of KPMG UK, said salaried partners at the firm have bonus arrangements “linked directly” to the size of the partner profit pool.
He added: “Having both of these roles is an approach common across the market and allows for salaried partners [to join] the partnership in a way that allows them to grow in the role, at the same time of being rewarded by the firm’s success and starting on a path to becoming an equity partner.”
Salaried partnerships also in effect prolong the path to equity partner by increasing the number of promotions needed to reach that job. Not all salaried partners become equity partners.
Since 2018, KPMG has been hit with 16 sanctions by either the accounting watchdog or industry tribunals. The total penalties and costs levied against the firm during that time amount to more than £95mn.
