EY to axe 3,000 employees in the US: Here's why
Economic uncertainties have affected consultancy companies around the world. Accounting giant Ernst & Young (EY) has now announced its decision to fire around 5% of its workforce in the US. It is the second among the world's four biggest accountancy firms to fire employees. The first was KPMG. Let's take a look at why EY decided to lay off its US staffers.
Why does this story matter?
Consultancy firms worldwide have been hit by a lack of mergers and acquisitions. Austerity has become the chosen way of doing business for most companies due to economic uncertainties. With the corporate world spending less, consultancy firms are in a pickle. The failure of two banks in the US added to their struggles. Additionally, EY also has its share of internal struggles.
Layoffs will mainly affect EY's consultancy business
EY has decided to fire around 3,000 employees in the US. The decision comes after the company dropped its plan to separate its audit and consultancy units. The company said the job cuts are part of the "ongoing management of the business." It is unrelated to the "recently concluded strategic review," the company added. The layoffs will primarily affect the consulting business.
An economic downturn is expected in the US
EY attributed the job cuts to "current economic conditions, strong employee retention rates, and overcapacity." The move comes at a time when corporate America is bracing for a sharp economic downturn. Several analysts have predicted a recession in the US this year. Last week, the IMF said a US economic downturn is "within the realm of possibilities."
US affiliate refused to take part in the firm's reorganization
'Project Everest,' EY's ambitious reorganization plan, was called off last week. The accounting giant decided to stop pursuing the plan because its US affiliate refused to participate. The plan suffered multiple setbacks over the past year, but the refusal of the US affiliate to take part put a sudden end to it. For all we know, the layoffs could be a result of that.
Job cuts will affect "less than 5%": EY
"After assessing the impact of current economic conditions, strong employee retention rates, and overcapacity in parts of our firm, we have made the difficult business decision to separate approximately 3,000 US employees, representing less than five percent of our US workforce," EY said.
KPMG, Accenture, and McKinsey laid off employees
EY joins its rival KPMG in laying off employees in the US. The latter fired about 2% of its workforce, or around 700 employees, in February. Other members of the big four, Deloitte and PricewaterhouseCoopers, are yet to make similar decisions. Other consultancy firms, including Accenture and McKinsey, have announced their plans to slash the workforce.
