EY has told staff it will cut 3,000 jobs in the US to eliminate “overcapacity”, with the axe falling mainly on the consulting side of the firm.
The redundancies account for about 5 per cent of EY’s US workforce, although the percentage reductions will be higher in the affected businesses.
The cuts were announced less than a week after the collapse of a plan to spin off EY’s global consulting business into a new company, codenamed Project Everest.
“After assessing the impact of current economic conditions, strong employee retention rates and overcapacity in parts of our firm, we have made the difficult business decision to separate approximately 3,000 US employees,” an EY spokesman said.
“These actions are part of the ongoing management of our business and not a result of the recently concluded strategic review, known as Project Everest,” he added.
Consulting businesses have slowed sharply over the past year after a period of outsized growth when clients were racing to upgrade their IT during the pandemic. A mergers and acquisitions boom that boosted consultants’ deal advisory work has also petered out as interest rates have risen.
EY’s cuts are deeper than those announced by other consulting groups in recent months. KPMG laid off close to 2 per cent of its US staff in February and Accenture has said it would cut 2.6 per cent of its global workforce over the next 18 months. McKinsey is restructuring its back office in a way that will reduce about 3 per cent of its workforce.
EY’s global leadership pitched Project Everest as a way to turbocharge growth by freeing both sides of the firm from conflict-of-interest rules that prevent consultants from selling many services to the audit clients. However, leaders of the US business blocked the deal amid doubts that the audit-focused side of the business would be strong enough on its own.
The plan had consumed more than a year of work and cost EY more than $600mn, executives told staff last week.
The US executive team warned last week that it was planning a “simplification” of the firm to save up to $500mn of annual costs. Executives in the UK have sent similar signals that cost cuts will be necessary.
The Big Four accounting and consulting firms all went on a hiring spree during the recovery from the pandemic, struggling to keep up with the heavy volume of work and a greater than usual number of staff leaving.
However, they have scaled back recruitment dramatically. The latest monthly survey by William Blair last week found that job postings by the Big Four were 62 per cent lower than a year ago.
Additional reporting by Michael O’Dwyer in London