KPMG promotes 42 new equity partners

KPMG has promoted employees to its top ranks for the first time in four years in a bet that demands for its professional services will grow after fighting a sector-wide slowdown.
The Big Four firm has added 42 new “equity partners”, who jointly own and manage the firm, having shrunk the number of partners to a fraction of the size of its competitors.
It is thought the promotions have boosted the size of KPMG’s partnership to more than 500 after its numbers fell to their lowest level since 2002 earlier this year. While it has not promoted internally to its top ranks, it has hired some outsiders to join its partnership.
KPMG employs about 18,000 people in the UK and provides auditing, consulting and tax advice to some of the country’s biggest companies.
Equity partners in the Big Four of Deloitte, PwC, EY and KPMG vote on key governance issues at their firms and are entitled to a slice of its profits at the end of the year. Last year this equated to an average of £746,000 per partner at KPMG.
As the growth in billings from customers has fallen due to a lack of major takeover deals and other corporate activity in recent years, KPMG has been shrinking its partnership to maintain the profits that its remaining partners share in. As partners have retired or left the firm and not been replaced, numbers shrank to 467 last year, a 20-year low and less than half of PWC’s 1,057-strong partner rank.
It has instead been promoting employees to being “salaried partners” who do not hold an equity stake in the firm. Last month KPMG also promoted about 57 new salaried partners.
KPMG’s decision to grow its partnership is bucking the trend. Last month Marco Amitrano, PwC’s new boss, announced that it would be the latest firm to create a salaried role for partners, known as a “managing director”. The move was seen as an indication that it would be shrinking admissions to full partnership.
The Big Four, including KPMG, have been cutting staff numbers to keep a lid on costs. KPMG has been trying to improve the quality of its auditing services, after it was criticised for its flawed bookkeeping of the outsourcer Carillion, which went bankrupt in 2018 with £7 billion worth of debts. This has required investment which has been passed on to KPMG’s clients.
Last week KPMG announced that it had resigned as the auditor for London Luton airport, after the airport refused to pay the increase in fees it had requested. Last year KPMG was paid £120,000 for signing off the airport’s books.
The airport has drafted in KPMG’s competitor, Grant Thornton, to do its bookkeeping. The cosmetics retailer Lush also dismissed KPMG from its auditing post because of a row over its fees.
A KPMG spokesman said: “As a sector, auditors face a number of upward cost drivers, including increased regulatory requirements and changes to auditing standards, which require continuous investment in our processes, our people and increasingly our technology. In some instances, this means the pricing of an audit will need to increase, to reflect the increased complexity of the work and the increased resource that’s required to meet the new regulatory standards.”