Distributable profits before tax increased by 3% from £437 million to £452 million
EY, the professional services firm providing assurance, tax, transaction and advisory services, has reported UK fee income growth of 7% to £2.150 billion for the year ending 1 July 2016, up from £2.010 billion in the previous year.
This takes EY’s Compound Annual Growth Rate over the last five years to 8%, adding nearly £700 million to its revenue.
Steve Varley, EY’s UK chairman, said: “We had another good year at EY, with strong growth across all of our service lines, sectors and regions. This has partly been driven by a focus on innovation and investment in technology both within our own business and in the services we provide to our clients.
“We continue to evolve and innovate our business – adapting and responding to new disruptive technologies. Our data analytics capabilities are now a cornerstone of how we deliver and drive our Assurance business. Following our audit successes last year with RBS, Royal Dutch Shell and Associated British Foods, we won several new audits in 2015-16, including Thomas Cook, Persimmon, Vedanta and Renishaw.”
The slow-down in the run up to the EU Referendum reduced the momentum of EY’s overall performance, however all service lines and regions still reported strong growth over the year. Distributable profits before tax increased by 3% from £437 million to £452 million.
Varley said: “There have been a variety of economic and political headwinds affecting global growth with the uncertainty around the impact of Brexit being one of a number of challenges that companies are having to consider. However, I am confident that our global structure and deep sector experience will continue to be a differentiator. We are already seeing signs of an improving market with activity levels picking up in our first quarter of the new financial year.
“In order to maintain this momentum it is vital that business and government continue to work together to ensure the UK remains attractive, competitive and connected in the global economy.”
Globally, the organisation reported annual revenues of US$29.6b for its financial year ending 30 June 2016. This represents a 9% increase over financial year 2015 revenues in local currency.
Driving growth in Scotland
EY’s investment in Scotland continues to grow with the headcount now beyond the milestone of 1,000. Across the four offices in Edinburgh, Aberdeen, Glasgow and Inverness EY has welcomed 123 new joiners and 131 promotions have been made in the last financial year.
Mark Harvey, EY senior partner, Scotland, said: “Our business is going from strength to strength in Scotland. Our footprint on the ground has increased to a record high of more than 1,000 people with 38 partners dedicated to the Scottish market including three internal promotions. This provides just a snapshot of our commitment to Scotland and the Scottish economy.
“In the year ahead we will look to target further expansion particularly in corporate finance. Our newest partner, Ally Scott is one of Scotland’s premier dealmakers and will be driving the growth of our Transaction Advisory Services (TAS) practice and team.
“Financial Services remains a strong performer for EY in Scotland and is in a market leading position to respond to and embrace the challenges and opportunities for the sector including regulatory recalibration, the disruptive innovation of Fintech and the new industry considerations brought by the EU referendum result.”
In the UK, EY saw significant growth across all of its four service lines in 2016.
Tax saw the largest growth – 12.4% to £581m – with strong performance in its M&A practice, UK corporate tax advisory teams and the regional tax business. The Global Compliance and Reporting team significantly increased their market share. Law also made great progress in its first full year of trading.
Assurance grew by 5.8% to £619 million, fuelled in part by the prior year’s audit wins. EY’s success in winning new audits continued during 2016 and focusing on audit quality continues to be an absolute priority. The positive results of the Financial Reporting Council’s (FRC) annual audit quality inspection report reflect the significant level of investment EY has made.
Transaction Advisory Services (TAS) grew by 6.2% to £344 million, delivering sustained growth in a challenging market; this is a robust reflection of the deep industry expertise and strength of strategic advice TAS teams provide to clients on all aspects of their capital agenda. The Advisory business grew by 3.8% to £606 million, supported by good growth overall and the adoption of disruptive business models and technologies.
Financial Services, EY’s largest industry sector, has had a record year. In its eighth consecutive year of growth, it grew revenue by 12.7%, and both Banking & Capital Markets and Wealth & Asset Management grew by more than 15%.
The financial services business outside of London continued to grow strongly, in particular in Bristol, Edinburgh, Leeds, Manchester and Newcastle. It was an outstanding year for the FinTech team, and it has developed the one of the largest FinTech, data and robotics practice in UK financial services.
Its investment in audit, capital markets, innovation, and our managed services business, which performs tax and regulatory services for clients, will continue to drive growth in financial services in 2017.
EY’s investment also extended to its technology capabilities, including improvements to its audit tools and the setup of a Shoreditch-based innovation hub EYX. EYX works with clients and startups to support innovation and create business value using key disruptive technologies such as blockchain, artificial intelligence, augmented reality and robotics. EYX works closely with Chief Innovation Officers in each service line to develop and enhance the firm’s offerings throughout the UK including Scotland; as technology continues to disrupt and revolutionise the way EY and clients do business.
EY acquired Seren, a 60-strong digital consultancy based in London’s tech hub, at Silicon Roundabout. The acquisition was the first of its kind for EY in the UK, and is part of continued investment and growth on a national and global level.It also made another technology acquisition – Integrc, a privately owned, leading provider of governance, risk and compliance (GRC) services to companies that run SAP.
The establishment of EYX, the Seren and Integrc acquisitions combined with new ways of working such as “hack” events and crowdsourcing put EY at the forefront of disruption and innovation.
EY was also the first and only member of the Big Four to sign a membership deal with Innovate Finance, the leading global FinTech association in the UK, to collaborate on a rolling talent programme and develop cutting-edge research to support the FinTech community and champion the UK as the global centre of FinTech innovation.
While overall profit is up, the firm’s continued multi-year investment programme and increase in Partner numbers has reduced average distributable profit per Partner to £662,000, down 5% from £700,000 in 2015.
EY recruited over 4,000 people across the country, including over 1,500 student places. EY also had 62 new equity Partners join the UK Partnership this year, building on the record 95 equity Partners admitted last year.
EY’s commitment to diversity and social mobility was further enhanced this year as it removed academic qualifications from its entry criteria for graduates, undergraduate and school leavers.
The firm’s new assessment tools are designed to look at a candidate’s true potential, giving every applicant the opportunity to prove their abilities. This initiative was implemented to ensure that EY recruits talent regardless of background and is aligned with its efforts to drive diversity and inclusiveness across the business on a service line and regional basis.
Varley added: “EY continues to have a leading people culture with a transformational approach to developing talent. We create a positive working environment where our people feel empowered to achieve their personal and professional ambitions. I firmly believe that this culture has enabled us to achieve this year’s growth and will position us well for the year ahead.”