The big four consulting firms have announced considerable layoffs as the slowdown in the economy begins to impact the jobs market.
Professional services firm Ernst & Young (EY) recently made 232 employees redundant following a cut of 338 jobs by rival firm PricewaterhouseCoopers (PwC). The latter’s decision was spurred by longtime client Westpac’s announcement that it would not renew its auditing contract with the firm.
KPMG has followed suit with its contemporaries, letting go of 100 staff in late October.
CEO and Regional Managing Partner of EY Australia, David Larocca, has outlined the various challenges his firm is currently facing, predominantly stemming from reduced demand for consulting work, necessitating staff layoffs.
“We are in a challenging and uncertain environment, with the market continuing to shift at the fastest pace that we have experienced in the last 15 years,” Mr. Larocca said.
“This has had a significant impact on the demand for our services, and we are forecasting for this reduced demand to be felt for most, if not all, of this financial year.”
He said that although steps have been taken to mitigate the effects of the current downturn, it hasn’t been enough to avoid culling employees.
“Regrettably, this hasn’t been enough to manage through the downturn, and after making these changes, we made the difficult decision that redundancies were required in some parts of our business, resulting in 232 people across Australia leaving EY Oceania,” he said.
Redundancies at the Big 4 have partly come about as a result of a growing distrust of the sector amid several scandals, particularly PwC’s leak of sensitive government information.
Although the firm primarily services clients in the private sector, it has also worked with politicians through its now spun-off government-facing arm, Scyne Advisory.
Earlier this year, it became apparent that consultants working with the government had leaked information about tax legislation to consultants working with private entities to assist them in paying less tax.
Serious ramifications ensued with the firm’s regional CEO stepping down along with nine senior partners.
Westpac made its decision to cut ties because of recent revelations surrounding the scandal, whilst Macquarie and Commonwealth Bank were forced to defend their association with PwC to their respective board members.
Large corporate layoffs in Australia have not been restricted to the consulting industry.
Last week, although not officially announced, it was reported that Macquarie Bank had let go of a number of staff in its banking and financial services division.
Looming Recession?
A nationwide recession is being forecast by some companies as substantive rates of inflation in Australia have given rise to 13 successive cash rate increases since May 2022, when it sat at a low of 0.1 percent for six months.Mark Bouris, CEO of Yellow Brick Road Home Loans—a mortgage broking company—voiced his concerns about the RBA’s decision to hike the cash rate 25 basis points on Nov. 7.
“Businesses are borrowing money at a higher interest rate than they’ve ever seen in the last ten years. They’re the sort of business owners who will say that next year they can’t afford to have as many staff or that they will have to start cutting back on their costs.”
Mr. Bouris also warned the Australian populace that current economic circumstances are being distorted by an increase in immigration spurring a fleeting spike in sales growth.
“We had a pretty warm September. If you look at the data in terms of retail sales, sales have been increasing as has our population. As a result of that, we’ve had a bit of increase in retail sales but it doesn’t mean we’re doing well. It doesn’t mean small businesses are doing well. It doesn’t mean homeowners aren’t struggling.”
There is also the reality that the cash rate has revealed itself as somewhat of a blunt tool in curtailing inflation given that plentiful savings from older generations act as a buffer against its theoretical effects.
Reserve Bank of Australia Governor Michele Bullock, herself a baby boomer, hinted on Nov. 7 that her generation may be partly complicit in the national cost-of-living crisis.
