KPMG admitted yesterday that it will struggle to maintain revenues over the coming year unless merger activity picks up in Europe and the US.
firm blamed the global economic downturn for flat revenues and a sharp decline in earnings.
Mike Rake, chairman of KPMG International, said that profits in the UK were likely to be 15% to 17% lower when it reports next year despite a 4% cut in staffing levels. Rival accountancy firm Ernst & Young reported a similar fall in prof its last month. Mr Rake said: “In the short term we are confident revenues will be positive from our audit business.
“Corporate recovery and forensic accounting will also be in demand in the current climate.
“But our corporate advisory and tax businesses will face a challenging environment unless there is a pick up in the number of transactions in the market.”
The firm reported revenues of $10.72bn for the year ended September 30, an increase of 3.9% compared with a year ago.
The figure for 2001 of $10.32bn has been revised down from $11.7bn to reflect the separation of its remaining consulting businesses, Mr Rake said.
Europe, the Middle East and Africa recorded stronger than average growth, he said, while the US remained stuck in the doldrums, hit by the slowdown following September 11 and the Enron affair.
Mr Rake said accountants needed to address issues of integrity and ethics following the collapse of Enron and he called for the British accountancy industry's fledgling regulator to be scrapped in favour of one with wider powers that is more accountable to government. He criticised the complex structure of the current regulatory regime, which has been criticised for taking more than a year to get operational.
He claimed the firm was also taking steps internally to address issues thrown up by the Enron affair.
He said that several audit clients had been dropped and the firm had withdrawn from a string of offshore financial centres.
“We have been consolidating practices for the last 18 months, which is long before the Enron collapse,” he said.