- Ongoing long-term investment in audit quality with improved regulatory ratings
- Investment outside London continues with the creation of centres of excellence including the new Tech Foundry in Reading with plans to create 350 new jobs
- Over 4,000 people join Deloitte, including 1,200 graduates and apprentices
- Female partner promotions up nearly threefold to 32, or 41% of promotions
- More than 416,000 people supported through volunteering, pro-bono work, donations and fundraising
Richard Houston, UK and North South Europe senior partner and chief executive, said: “Our clients and our own profession are facing a time of substantial change, challenge and opportunity with slowing economic growth, ongoing political uncertainty and the impact of technology disruption. Over the past year we have supported both the public and private sector navigate the changing and challenging backdrop, whether helping manage the uncertainty of Brexit, transforming businesses through the use of digital technologies, or addressing critical risks such as cyber.
“Our 2019 results reflect the long-term investment we have been making across our business and, in particular, in audit quality and the training, technology and talent required to support it. This investment has helped us succeed in the market and improved the financial performance of our audit business.
“We’ve also made strong progress this year on our purpose agenda. For example, our female partner promotions were up threefold, and we supported over 416,000 people get access to education and employment through our social impact strategy.
“It’s a huge privilege to be leading Deloitte and these results are a testament to our talented people and the progress we have made. But I want us to go further - ensuring we are making a positive impact in all of the work we do - with clients, our people, and importantly across the many communities in which we work. Among my priorities in the months and years ahead will be an unequivocal focus on workplace culture and inclusion. I want Deloitte to be a strong representation of society, with a diversity of thought and experience, which will only improve how we serve our clients.”
Financial highlights
Across business lines, Audit and Risk Advisory revenue grew by 8.1% to £1,110m (of which Audit & Assurance was £582m), Consulting increased 9.0% to £952m, Financial Advisory by 10.5% to £507m and Tax & Legal saw its revenue rise by 17.8% to £862m. Deloitte Switzerland saw growth of 10% to £538m.
In the year ended 31 May 2019, distributable profit was £617m, up from £584m in the prior year[2]. Distributable profit in the year ended 31 May 2019 has benefited from a one-off gain on the sale of an investment, lower provisioning charges and currency gains; without these, distributable profit would have been flat.
The firm’s total tax contribution was £1,057m in 2019. This comprised £638m of taxes collected on behalf of HMRC (VAT, PAYE and employee national insurance) and £419m of taxes borne by the firm (partner income taxes, national insurance, corporation tax and employer’s national insurance).
Continued investment in audit quality and the audit product of the future
The strength of being part of a multi-disciplinary firm has enabled a continued multi-year investment in audit quality and transformation. Investment of this scale would not be possible in an audit only firm. The firm’s audit quality record from FRC inspections improved over the prior year – 84% of audits reviewed by the FRC in 2018/19 were found to require no more than limited improvements, compared with 76% in 2017/18.
In addition to the investment in new audit technologies and processes, the firm is also committed to developing an audit product that is fit for the needs of modern society. Deloitte is engaging with the various reviews into the audit market as well as with a number of other stakeholders to ensure that the firm is at the forefront of this debate. Delivering the audit product of the future, which meets the evolving needs of society and investors, requires the depth of skills and investment capacity that is only possible with the scale that comes from being a multi-disciplinary partnership firm.
Stephen Griggs, managing partner Audit & Assurance, explains: “We have been consistent in our support for change in the audit market and are positive about many of the proposals that have been put forward. We are looking at how to adapt the scope of our audit to match the needs of stakeholders and the evolving reporting landscape. Companies’ annual reports have undergone significant change in recent years and now contain much more information about how businesses create sustainable value, their business model and their viability - it is vital that the audit responds to meet this evolving reporting landscape.
“We also need clarity about what all parts of society – the public, government, investors, business – expect of an audit and the ongoing Brydon Review will provide much needed independent insight.
“However, we do not agree with proposals that would see any form of separation of the audit business from the rest of the firm. Audit quality is considerably enhanced by the investment capacity and access to specialists that being part of a much larger and diverse multi-disciplinary firm allows.”
Accelerated growth in the regions
Deloitte’s regional business has seen accelerated growth throughout the year with revenue growth of over 15%.
Pauline Biddle, managing partner for the regional market, explains: “Business is changing and with it the need to provide expertise and support across multiple locations, both nationally and internationally.
“Over the past year the regional practice has gone from strength-to-strength. Our employee numbers are up 13%, now exceeding 7,500 and the firm’s regional footprint has grown significantly. We have invested in centres of excellence, including our new tech hub in Reading, and continue to invest in a number of our key delivery centres, which will see both Cardiff and Belfast collectively employ over 2,000 people in the near future.
Paul Schofield, South East East Practice Senior Partner said, “In Cambridge we’ve seen a 6% increase in headcount supporting market and market share growth; during the year we have welcomed colleagues in economic consulting, financial advisory and real estate disciplines as well as audit, tax and risk advisory. We have seen further growth in St Albans and in addition, we’re delighted to have opened a new 30-strong office in Ipswich, establishing a Global Trade Bureau that offers a market-leading customs compliance service.”
Recruitment, talent and diversity
In the 2019 financial year, over 4,000 people joined Deloitte, including 1,200 graduates and school leavers in Deloitte’s apprenticeship programme.
Of the 78 partners promoted in the UK, 32 (41%) were women, a near threefold increase in female promotions from last year, taking Deloitte’s female partners to 223 (21%), bringing the firm closer to its target of 25% of female partners by 2020.
In 2019 Deloitte announced changes to its award-winning Return to Work programme, which helps people find their way back into professional services after a career break. Instead of accepting returners every six months, Deloitte is rolling the programme into its year-round recruitment process, meaning those looking to return to work can apply for a job as soon as they are ready to re-start their careers
Paul Schofield added: “We continue to work hard to further increase the number of female partners in our firm and have prioritised the recruitment, development and retention of senior women as part of our gender balance action plan. Removing barriers to employment and providing support to people who have had time away from work is critical – that’s why we’ve opened up Return to Work opportunities throughout the year. In our St Albans office, of the three recent partner promotions, two were female and in Cambridge, Frances Cousins has joined the partner team.
Social impact
In line with the firms’ social impact initiative, Deloitte supported over 416,000 people through volunteering, pro bono work, donations and fundraising locally we are pleased to support the Papworth Trust and Earthworks.
Overall, Deloitte’s One Million Futures strategy, which was launched three years ago and focuses on skills, education and inclusion, has made an impact on over 890,000 people.
The firm is continuing the success of the initiative and announced 13 new charity partnerships earlier this year, which will continue the focus on helping people get access to education and employment.
Deloitte Legal
Following the appointment of Michael Castle as managing partner for Deloitte Legal, the business has continued to grow, with over 200 people delivering technology-enabled legal solutions in areas such as employment, litigation, corporate and commercial and immigration, including over 80 client-facing practicing lawyers.
Sustainability
The firm reached another milestone in its drive for sustainability when it opened its new headquarters in London. The new building in 1 New Street Square is the largest office in the world to achieve leading certifications for being both an exemplar green building and one designed to enhance the wellbeing of its people. It utilises onsite renewable energy sources and procures 100% green electricity.
Image: Paul Schofield, Deloitte South East East Practice Senior Partner.
[1] All revenue numbers presented herein have been prepared in accordance with International Financial Reporting Standards and IFRS Interpretation Committee interpretations, as issued by the International Accounting Standards Board, and are unaudited. In the current year, Deloitte applied IFRS 15 Revenue from Contracts with Customers (as amended in April 2016) using the modified retrospective transition approach. On a preliminary basis (unaudited), the application of IFRS 15 has not had a material impact on the financial position and/or financial performance of the Group.
[2] Distributable profit differs from profit as reported in the Firm’s Statutory Financial Statements as a consequence of, among other things, the treatment of equity partner annuities. Average profit per equity partner is based on distributable profit and was £882,000 in the year ended 31 May 2019. The year-on-year growth in average profit per equity partner is driven by the improvement in our distributable profit which, as highlighted elsewhere, has benefited from a one-off gain on the sale of an investment, lower provisioning charges and currency gains; without these, distributable profit would have been flat.
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