EY has reportedly told UK staff to brace for a wave of cuts, after the business spent $600m (£480m) globally preparing for a now-scrapped breakup of its operations.
Bosses at the accounting firm told staff during a phone call on Wednesday that it felt like a “low point” for the business, and admitted they were “disappointed and embarrassed” by the deal’s collapse.
EY announced plans for a radical shake-up, codenamed Project Everest, last year that would involve separating its audit and advisory divisions amid mounting criticisms over conflicts of interest at the big four accounting firms – EY, Deloitte, PricewaterhouseCoopers and KPMG.
But internal disagreements over the future structure of EY threw those plans into turmoil, with the firm eventually confirming on Tuesday that the separation would no longer go ahead.
That is despite having spent $600m on preparations for the split, which included $300m of internal work conducted by EY’s staff, bosses said on a call on Wednesday, according to the Financial Times.
The UK business took on £10m of its extra costs. While bosses said it would be offset by $400m in savings, those funds were saved by delaying or deferring other projects.
While it was not immediately clear how the costs would be spread across its global operations and over time, UK bosses said they would start cutting costs from July.
“We have inefficiencies in our business, which we can start to address now so we are already working on reducing our costs,” the EY’s UK managing partner for financial services, Anna Anthony, reportedly said on the call.
She said those inefficiencies were one of the “lessons learned” during preparations for the group’s separation but did not provide further detail on what the cuts would mean for staff. The US has also launched a $500m cost-saving programme, according to the Financial Times.
“Now definitely feels like a low point but it is important that we dust ourselves off,” Anthony said, adding that bosses felt “disappointed and embarrassed” by the deal’s failure.
The costs of the failed split will ultimately be shouldered by EY partners, such as Anthony, who are paid through its profits and were expected to receive large payouts if part of the businesses had been floated on the stock exchange after the separation.
Had the deal gone forward, total costs had been estimated to reach $2.5bn, plus bankers’ fees.
EY’s UK chair, Hywel Ball, also warned on the call there may be a risk to the EY brand in the short term, and that it could face an exodus of staff who had been waiting to see how Project Everest would be executed. He said partners needed to prepare for “a bit of a tough period”.
EY UK was contacted for comment.
