Revenues increased by 3% from £2.34bn to £2.40bn for the financial year ended 30 September 2019 at KPMG UK.
A busy M&A and restructuring market fuelled the firm’s deal advisory practice, which grew by 3% net sales while KPMG’s audit practice posted growth of 10%. Continued geopolitical uncertainty and widespread regulatory change saw KPMG’s tax, pensions and legal practice grow by 3%.
This follows a year of unprecedented investment in core areas of the firm, including £45m from in-year earnings as part of a planned £200m investment in audit by the end of 2020.
Bill Michael, Chairman and Senior Partner at KPMG in the UK, said: “We are creating a business that stands ready for the fundamental changes we expect to see over the next few years, both from the reforms necessary to rebuild trust in our sector and as we pivot our business to meet the changing nature of the work we are doing for our clients.
“We have undertaken a comprehensive overhaul of our audit practice, reappraising every aspect of what it does and how it interacts with the rest of the business. Central to that has been investing heavily in our capability and capacity to deliver the audit of the future.
“Our advisory business is increasingly winning long-term, multi-year contracts that deal directly with the most challenging and complex areas of our client’s businesses and require significant up-front investment on our part. We are winning these mandates by combining content, expertise and understanding from right across our firm. Our firm now has a strong base from which to capitalise on these opportunities.”
In November 2018, KPMG became the first UK firm to voluntarily stop providing ‘non-audit’ services to the FTSE 350 companies it audits. In June 2019, the firm introduced new governance which creates greater separation between audit and the rest of the firm. And in September 2019, around 500 tech specialists moved from the advisory side of the business into audit full time, joining the existing audit data science team to create a standalone audit tech unit.
Bill Michael said: “We are making the changes necessary to sustain public confidence in our firm and our profession. We took the lead in ending non-audit work for FTSE 350 clients, and we put in place stronger and more independent governance for our audit practice. We will continue to introduce sweeping reforms designed to draw a clear line between our advisory and audit businesses, improve audit quality and rebuild trust in our profession.
“In January 2020, we will announce a new separate Board for our audit practice. It will have stewardship responsibilities over people, performance, remuneration and audit quality and is a vital next step in creating a more defined, easier to regulate business with a clear governance structure.”
In line with KPMG UK overall, investment has continued across the Midlands region. During 2019 over 300 new colleagues were recruited and 146 promoted. The Midlands Corporate Finance team advised on various high profile deals each worth over £100m in value, including the merger of My Home Move and The Simplify Group, Freshstream’s investment in M&J Evans Construction, Silverfleet’s investment in CARE Fertility and LDC’s investment in Evolution Funding.
Commenting on the results, Karl Edge, Midlands Regional Chairman, said: “Our business across the Midlands grew in line with the wider UK firm, driven locally by our deals and tax practices.
“I’m extremely proud of the talented people we have in the Midlands for what we’ve achieved and the work we’ve delivered for our clients. I’m really pleased that we’ve been able to grow our regional business to a 1600 strong practice across the East and West Midlands. I believe that the Midlands still has ongoing momentum, even with the changes the economy is experiencing, and I’m looking forward to seeing the region flourish with more investment, development and opportunities.
“Our clients, like most businesses and organisations, are currently operating in a tumultuous geopolitical environment, combined with uncertainty and Brexit headwinds. We’ve been working closely with a number of businesses across the region to help them navigate the challenges that this brings and to provide tailored solutions to meet their needs. We’ve also invested both nationally and locally in our people and practices to adapt and respond to the regulatory changes the professional services sector currently faces.
“We’ve had a number of successes over the last 12 months, including our Corporate Finance team winning Advisory Team of the Year at Insider’s Dealmakers Awards 2019, which is testament to the £0.7 billion worth of M&A deals our team has advised on locally this year.
“I’m also really proud that over a third of our people dedicated over 7,000 hours of their time volunteering and supporting over 1,300 beneficiaries across the region’s towns and cities.
“Looking ahead the Midlands remains a key growth area of the UK economy, with various party manifestos pledging much needed investment in the East Midlands, Coventry named as the UK’s City of Culture in 2021 and the Commonwealth Games in 2022 being hosted in Birmingham. All are evidence of the region’s growing attractiveness to visitors, residents and businesses alike.
“Next year will be KPMG’s 150th anniversary which will give us the opportunity to celebrate our proud heritage here in the Midlands. As we go into the New Year, we are committed to contributing to the success of the Midlands and supporting the significant opportunities and challenges that it will bring.”
KPMG’s Midlands region is made up of three offices in Birmingham, Leicester and Nottingham.