FirstFT: EY tells UK partners to expect staff exits and cost cuts

EY’s UK arm is following its US business in telling partners to prepare for cost cuts and staff departures after the collapse of the firm’s long-running attempt to split its global business in two.

In a recording of a call shared with the Financial Times, Anna Anthony, UK managing partner for financial services, said yesterday: “We have inefficiencies in our business, which we can start to address now so we are already working on reducing our costs.”

Anthony said the inefficiencies were one of the “lessons learned” by EY during the failed attempt to split its audit and consulting businesses and that the cost-cutting would be part of the UK firm’s plan for its new financial year, which starts in July.

She did not give details of what the cuts would entail.

Anthony also confirmed that the costs racked up on the deal, codenamed Project Everest, had reached $600mn at the global level, including $300mn of internal costs for work done by EY’s own staff.

For more on the Big Four firm’s ill-fated break-up plan, I’d recommend:

• Power vacuum risk: After the failure of Project Everest, the future of global chief Carmine Di Sibio and other senior executives hangs in the balance.

• US retrenchment: EY’s US arm says it will embark on a $500mn cost-saving programme over the next 12 months as part of a “simplification agenda”.

Here’s what else I’ll be looking out for today:

Is a Labour victory over the Conservatives inevitable? Join award-winning FT columnist Stephen Bush and colleagues on April 19 as they tackle your questions in the run-up to the UK’s 2024 election. Register here for free.

Five more top stories

1. EXCLUSIVE: SoftBank has moved to sell almost all of its remaining shares in Alibaba, eventually cutting the Japanese group’s stake to just 3.8 per cent. It has sold about $7.2bn worth of shares in the Chinese company this year through prepaid forward contracts, the FT’s analysis of regulatory filings has revealed.

2. The Bank of England is working on reform of Britain’s bank deposit insurance guarantee scheme, the central bank’s governor Andrew Bailey said yesterday. His remarks in response to bank failures on both sides of the Atlantic raise the prospect of increased protection for UK customers.

3. Marex is considering a New York listing as it looks to revive plans for an initial public offering, in the latest blow to the London stock market. The commodity broker cancelled a listing in the UK in 2021 with a targeted valuation of between $650mn and $800mn.

4. JPMorgan Chase was aware by 2006 that Jeffrey Epstein had been accused of paying cash to have “underage girls and young women” brought to his home — seven years before the bank dropped him as a client, legal filings in New York yesterday alleged.

5. Royal Bank of Canada was the fossil fuel industry’s top financier last year, replacing JPMorgan after extending $42.1bn in funding. Here’s why Canadian banks have become the industry’s “lender of last resort”.

The Big Read

Unlike with the bankruptcies of companies and individuals, there is no law governing insolvent countries — only a chaotic, ad hoc process that involves a hodgepodge of contractual clauses and tacit conventions, tortuous negotiations and navigating geopolitical expediency. This fragile patchwork could unravel completely due to the emergence of a new, disruptive, opaque and powerful force in sovereign debt: China.

We’re also reading . . . 

• 2008 redux?: Fears of high interest rates leading to defaults on commercial property loans and solvency issues are greatly exaggerated, writes Megan Greene.

• Defending Oxbridge: Britons should not put down those who manage to get into elite institutions that contribute much to the UK, writes Jemima Kelly.

• Macron on Taiwan: The French president’s remarks that Europe should distance itself from tensions over the island have created an impression of disarray over the EU’s China policy.

Chart of the day

Investors are shying away from the riskiest US corporate debt as fears of an impending recession fuel a growing divide between the highest- and lowest-rated companies in the $1.4tn high-yield bond market.

Take a break from the news

New Zealand’s Stratford-Okahukura railway has long since been abandoned by regular train services. Now known as the Forgotten World Line, you can drive your own “rail cart” (which is really a golf buggy converted to run on rails) across 82km of a rugged landscape and remote hamlets . . . and past an unforgettable pub.

Additional contributions by Gordon Smith and Emily Goldberg