The global cost of ‘Project Everest,’ according to the partners of the firm in Britain, has reached $600mnEY’s UK bosses have told partners to prepare for a fresh cost-cutting plan and a stream of staff departures as they admitted to embarrassment at the collapse of the firm’s long-running attempt to split its global business in two.
Anna Anthony, UK managing director for financial services said on a call on Wednesday: “We can begin to reduce our costs now because we have identified inefficiencies within our business.”
Anthony said that the failure to separate the audit and consulting business was one of the “lessons” learned by EY. He also stated that cost-cutting measures would be part the UK firm’s new financial plan, which begins in July.
A recording of the call was shared after this week collapse of the breakup plan, code-named Project Everest.
Anthony didn’t give any details about the cuts. EY has already cut back , by reducing the costs of training and internal travel.
After rejecting putting EY’s breakup plan up for a vote, the US leaders of EY decided to launch an independent $500mn cost saving programme in order to implement a new strategic approach.
Anthony admitted that he felt “disappointed” and “embarrassed” at the collapse of the deal.
Anthony confirmed that EY had incurred costs of $600mn for the deal at the global scale, which included $300mn in internal costs. She said that the $400mn was offset by “savings” of delaying or postponing other projects. She said that the UK company had incurred extra costs of PS10mn.
She said that the costs would be capitalized, which means they would not be all booked in the current financial year. However, it was not yet determined how exactly the bill would be distributed among EY countries. Costs will be paid by EY partners who receive a share of EY profits.
The total costs were projected to reach $2.5bn, plus bankers fees, if the deal had gone through. The fact that we pulled the plug before we made a huge expenditure is good news in a certain degree.
Hywel Ball, UK chair, told his partners in the same conference call that the collapse of Project Everest posed risks to the brand’s perception “in the short-term”.
He said that while staff retention was improving, there would be a surge in the number of people leaving: “There’ll be a backlog of those who normally would have left, but were waiting to see how Everest turned out.”
He warned partners that they should prepare themselves for “a little bit of a difficult period”, but also said the UK firm is on track for its third consecutive year with “strong double-digit” growth in the 12 month period ending June.
Ball said that he informed the UK accounting regulator Financial Reporting Council about the cancellation of the company’s break-up plans. Ball said that the Financial Reporting Council was “disappointed, but supportive and understandable” about the company’s abandonment of its break-up plan.
He said the decision to abandon Everest was “a relief” for certain people within the UK partnership, as some of them were against the plan.