One of the main challengers to the ‘big four’ audit firms has asked its 4,500 UK employees to volunteer for drastic pay cuts or face a substantial redundancy programme.
Sky News has learnt that Grant Thornton – which was appointed yesterday as administrator to the rent-to-own retailer BrightHouse – informed its workforce about the move on Tuesday morning.
Staff have been asked to accept pay cuts of 40% to avoid the need for an alternative package that would involve unpaid leave and an undisclosed number of job losses, according to one insider.
The move underlines how even professional services firms typically regarded as being more resilient to an economic downturn are starting to feel the pain from the coronavirus outbreak.
Although firms with major restructuring practices – which advise companies in distress about their survival options, and handle insolvency processes – are expected to increase their earnings from that area of their businesses, other divisions are likely to suffer.
Consulting revenues, for example, are likely to suffer for many months as corporate clients hunker down, while audit fees may also be impacted if sizeable companies fall prey to the COVID-19 crisis.
Grant Thornton, which declined to comment, has been through a difficult period in its UK business, with management upheaval and weak profitability at a time when its nearest rival, BDO, has enjoyed a surge in earnings.
The big four – Deloitte, EY, KPMG and PricewaterhouseCoopers – are also implementing significant cost-cutting measures amid the COVID-19 pandemic.
The Financial Times reported that KPMG was considering withholding equity payments to partners in order to conserve cash.
Partners in the bigger audit firms typically earn pay deals worth an average of more than £500,000 annually.
Average partner pay at Grant Thornton last year was £373,000, meaning a 40% cut would have reduced their packages to about £225,000.