Accountancy and law firms across the UK are reportedly considering withholding partner payouts, in order to mitigate some of the financial impact the Covid-19 outbreak is having on the economy.
According to the Financial Times (FT), companies considering the measure include the ‘Big Four’ accountancy firms Deloitte, PwC, KPMG and EY, as well mid-tier firms BDO and Mazars.
A senior staff member at EY told FT: “We are already being hit by cash protection measures from our clients, some of which are extending their time to pay invoices. We are reviewing all of our loan facilities, partner capital and cash forecasts to make sure we have the headroom we need.”
Additionally, a BDO spokesperson told Accountancy Today: “As we manage the situation our focus is two-fold. Firstly, the well-being of our people and secondly to manage our business.
“This second element is complex and involves us monitoring matters and communicating with our partners, people and clients on a real time basis. Any decisions, including for example a reduction to partner draw, will be made based on business performance.”
They added: “We came into this crisis in good shape with a strong balance sheet so we will take the time to assess the situation, review the support measures the government has put in place and understand clients’ demands and needs.”
A Deloitte spokesperson said the firm has been “closely monitoring and managing the Covid-19 situation”, and will continue to stay focused on “supporting its people and clients and maintaining [Deloitte’s] economic resilience”.
It comes after analysts at the Centre for Economics and Business Research (CEBR) warned that the UK economy is about to enter the “deepest recession” since the financial crisis, including the steepest quarter-on-quarter decline in economic activity since comparable records began.
CEBR expects the economy to have contracted marginally in the first quarter of the year, by 0.5% quarter on quarter. This is expected to be followed by a much steeper contraction of 15% in GDP in the second quarter as business closures take their toll, according to analysts.
EY and PwC have been contacted for comment.
KPMG declined to comment.
