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Ernst & Young is laying off dozens of partners across all U.S. businesses, a deeper round of partner cuts than usual as the Big Four accounting firm faces slowing demand for certain services and seeks to cut costs following its failed plan to break up the firm.
The cuts are largely concentrated on the advisory side of the U.S. operation, affecting more than 10% of partners in consulting and about 4% in strategy and transactions, but they touch the audit and tax arms as well, people familiar with the matter said. That would equate to more than 100 partners in consulting and over 30 partners in strategy and transactions at both junior and senior levels.
EY began to inform affected partners last week, with notifications expected to continue this week, the people said. Some U.S. partners tend to be cut annually over unsatisfactory performance, but the cuts underway are larger than usual, the people said. The cuts follow EY’s move in April to let go of 3,000 U.S. employees or less than 5% of its U.S. workforce.
EY and other accounting and consulting firms are dealing with slowing revenue growth, leading several of them to pare their ranks. The firms aggressively hired people during the pandemic, propelled by higher demand for consulting in areas such as corporate strategy and digital transformation. In the wake of the pandemic, attrition has been slower than firms anticipated.
The accounting firm said the U.S. layoffs affect a “limited number of people.” It also deferred start dates for some new hires in certain areas, a spokesman for the U.S. unit said. “These decisions have been thoughtfully made with respect and fairness for all of our people and the future of our business,” the spokesman said. “EY will offer comprehensive support to those who are affected.”
“As part of our long-term planning, EY has been transforming our business to focus on the areas where our clients have the greatest needs,” the spokesman added.
Consulting demand tends to weaken or surge depending on the economy, whereas audit is a generally steady business line because of the reporting requirements for public companies. As consulting contributes to a growing share of these firms’ revenues compared with audit, the overall professional services industry has grown more cyclical.
KPMG laid off about 5% of its U.S. staff over the summer—including advisory, tax, and back-office people—after cutting some advisory personnel or nearly 2% of U.S. staff earlier in the year. In April, Deloitte cut 1.5% of its U.S. staff. Consulting giant McKinsey recently shrank its new partner class by about 35%.
Revenue from EY’s Americas region, which includes the U.S. unit, totaled $23.62 billion for the year ended June 30. That is up 12% from the prior fiscal year, compared with a 19% increase a year earlier. The Americas region represents the largest share—nearly 48%—of the firm’s $49.35 billion in global revenue.
Globally, the consulting and transactions businesses collectively brought in $22.17 billion, or about 45%, of the total.
EY also has been looking for areas to reduce costs and improve its structure in the U.S. following the decision in April to scrap plans to split auditing and consulting into two firms.
Last month, the firm proposed governance reforms that would give U.S. partners more say in voting related to strategy and oversight. The U.S. unit played a critical role in the split’s demise. Partners are expected to finish voting on the proposed changes later this month.
Janet Truncale, an America's financial services executive whom EY named last month as its new global chair effective in July 2024, will lead the firm’s efforts to move beyond the failed split.