EY cuts 3,000 US jobs after bid is shelved to break up company (1)

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Ernst & Young said Monday that it will cut nearly 3,000 jobs from its US workforce as it focuses on addressing shifts in demand and “overcapacity” in its business divisions.

The cuts represent less than 5% of the company’s total US workforce. EY described the workforce reduction as “part of the ongoing management of our business” and said it did not stem from the company’s recent failure to implement a global breakup.

“After assessing the impact of current economic conditions, strong employee retention rates, and excess capacity in parts of our company, we have made the difficult business decision to fire approximately 3,000 US employees,” EY said in a statement.

EY US generates more than 40% of the company’s global revenue and employs approximately 50,000 professionals.

Large accounting firms like EY typically lay off employees in the spring before the end of June of their fiscal years, but it wasn’t clear if the recent cuts come on top of those performance-based rosacea slips. The Big Four accounting firm did not immediately respond to additional questions about downsizing.

The EY cut is just the latest in a chain of layoffs among the company’s consulting industry competitors — a sector that has been hampered by slowing demand and many professionals. Last month Mackenzie Accenture Plc said it would cut 1,400 jobs and Accenture Plc said it would cut 19,000 jobs.

KPMG LLP, a Big Four accounting rival, said it would cut 700 jobs from its consulting business, it said in February.

EY’s top global leaders last week on the shelf A long-running plan to split the company’s advisory business and much of its tax practices to form a public company. The debt-and-equity deal would have provided unexpected one-time payments to audit partners, funded retirement payments for retirees and provided capital for the new company.

Since EY announced restructuring goals last May, inflation and interest rates have risen rapidly, while the IPO market has collapsed, jeopardizing the company’s $100 billion enterprise value for the proposed new company, along with financing available to attract the support of existing and retiring partners.

The senior partners disagreed over compensation and the resources to employ the remaining auditing practices — a major sticking point for the leaders of EY’s US affiliates, which ultimately opted out of the deal. Just days after it was revealed that it was abandoning the split, EY’s US and UK subsidiaries announced $500 million in cost-cutting efforts.