There are some weird messages coming out of the Big 4 accountants on the state of the economy right now. The messages do not come from their stated opinions but rather from their own actions.
Start with this about KPMG:
https://twitter.com/TaxNotes/status/1673760671651995649?s=20
Now that is, admittedly, in the USA. And we do know KPMG is having a bad time. But the key phrase is 'declining demand for professional services'.
Then there is this from the FT:
PwC has told its 25,000 UK staff to expect smaller pay rises and bonuses if not freezes this year because of “challenging” market conditions despite industry calls to catch up with stubbornly high inflation.
They added:
The firm's junior auditors were told on webcast last week that the pay band for one cohort would be frozen while others would increase by 3 or 6 per cent, resulting in real-terms pay cuts, firm insiders told the Financial Times.
Given that the market for junior auditors is pretty competitive there is no way that PWC would be doing this unless three things are happening.
The first is that wages in financial services, which have very largely kept up with inflation to date, are now falling behind.
Secondly, that is not just happening at PWC but is an industry-wide phenomenon.
Or, thirdly, PWC is keen to see staff leave as it has too many to meet demand.
The last could be true. I heard from the CEO of a mid-tier quoted company recently who told me that companies are queuing to quit using the services of the Big 4 accountants but the next tier of firms have not got the capacity to quote for all the work now available to them. So there may be a serious realignment in the market going on here to which PWC is reacting.
Or alternatively, pay is falling.
Or, perhaps, profits are being taken.
All we can be sure of is that the pain is being shifted onto junior staff. Now there's a surprise.
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Another possibility is that they plan to switch to using AIs for grunt-level work, so they’ll need fewer warm bodies.
Politely, that’s a fantasy
Artificial Intelligence is taking over financial services on a grand scale.
No it isn’t
There is also the ever increasing number of roles being shipped overseas, mainly to India and other centers.
Hello Richard.
My comment doesn’t directly concern this blog post, but might have something to do with accounting. I don’t know.
I wonder if you’re going to write anything about Thames Water? Or more specifically the way this company and many others are run.
I noticed a lot of tweets mention ‘loading the company with debt’. This isn’t unusual for companies but I do not understand why this happens.
If one assumes, (and it is only an assumption) that the people running Thames Water (and similar) are only interested in as much profit extraction as possible, then what role does ‘loading the company with debt’ provide in achieving this?
Thanks.
Tomorrow….
Tax avoidance.
“Thames Water does not currently pay corporation tax because of the Government’s capital allowances scheme, and the impact of our interest costs. The Government’s capital allowance scheme incentivises capital investment and effectively defers the time at which tax is paid.”
TW Statement 23 Mar 2023
Likewise, not immediately to do with this post but I wondered if this piece
https://www.theguardian.com/business/2023/jun/27/bank-of-englands-quantitative-easing-scheme-let-inflation-take-root
was a surreptitious opening move to counter the growing influence of proponents of people’s or green QE like yourself? Can QE be said to have influenced inflation upwards? In the way described in the article?
Thanks
Weird that they are now saying this having denied it for a long time
There is not a shred of evidence that it is true
it is excruciatingly painful to see Bailey brown-nose Lagarde with his ‘evidence based’ bs. If only he rub the grub out of his eyes to see ehat is happening in the UK,…
I think you’ll find that AI will be a game changer in many spheres. Dismissing it as fantasy does not mean it is not going to happen. It is and it will and not only in financial services. And the speed of advance when it comes will be rapid.
I have no do t it will have an impact
But audit requires a lot of judgement and basic data analysis has already been heavily automated, so I am not convinced in that sector