KPMG now ranks as the Big Four's smallest firm

A drop in profits has seen KPMG fall to fourth place in the 'Big 4' grouping of the accountancy sector's most famous firms.

Its UK profit falling 7% for its last financial year means that the company is now behind rivals EY when it comes to revenues, making KPMG the smallest operator out of its peer group.

Pay cut

KPMG’s profits have now fallen for two years in a row, although in part that can be put down to an increased spend on the upgrading of its network of offices as well as investment in the firm's consulting arm.

Revenues actually increased, going up 2.6% from £1.9bn to reach £1.96bn this year, and a profit of £383m in the year to September has even led to a 13% pay cut for partners.

However, even though the average reduction was £92,000 year-on-year, the average award was still £623,000 each.

Deliberate self-harm?

UK chairman of KPMG, Simon Collins, commented: "If you look at the way we’re investing this year, the profit story is more 'deliberate self harm', to allow us to grow."

Over the year, KPMG spent £49m on acquisitions and a further £120m investing in property, plant and equipment. Staff training and development costs were £27m.

KPMG’s biggest business line is its advisory work, and their earnings fell 5% to £308m.

"If I’ve got one disappointment this year it would be the advisory growth rate," Collins said and added, "It was perhaps a bit optimistic to think that we could make this type of change in operations and still power through with the same level of growth."