Transcript: The Big Four’s year of lay-offs 

This is an audio transcript of the FT News Briefing podcast episode: ‘The Big Four’s year of lay-offs’

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Joanna S Kao
Good morning from the Financial Times. Today is Monday, December 11th. And this is your FT News Briefing.

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French president Emmanuel Macron faces an important test over immigration today. And the Big Four accounting firms are contending with multiple rounds of lay-offs this year.

Stephen Foley
This is internally very disruptive. It’s not very good for morale, of course. So you want to be one and done. And that’s not how it’s playing out.

Joanna Kao
Plus, fans of Major League Baseball got some huge news over the weekend. I’m Joanna Kao, in for Marc Filippino. And here’s the news you need to start your day.

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It’s a big moment for French president Emmanuel Macron. Today, he will try to get lawmakers to vote on his long-promised plans for immigration reform. The draft law would tighten the asylum system, reduce the number of appeals that people can make and require proficiency in French. These are measures meant to appeal to the rightwing lawmakers and reflect hardening public opinion on immigration. But critics say they would only result in small tweaks to current policy. The proposed law was initially floated a year ago, but has been delayed multiple times. Losing Monday’s vote would be a huge embarrassment for Macron. He’s struggled to govern since his re-election last year.

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The Big Four accounting firms have been on a bit of a spree of lay-offs. Earlier this month, EY announced it was cutting another 150 jobs in the UK. Deloitte, KPMG and PwC have cut hundreds of jobs this year, too. Here to talk about what this means for the industry is the FT’s Stephen Foley. Hi, Stephen. 

Stephen Foley
Hello, there.

Joanna S Kao
Why are we seeing these job cuts across the entire Big Four?

Stephen Foley
Well, it’s the economic environment and it’s the deal environment as well. We’ve had a very prolonged slump in mergers and acquisitions activity, and we’ve got a lot of economic uncertainty out there, which means that a lot of the work that these firms stuffed up very heavily in the previous few years in order to do — that work is not coming through as they expected. And at the same time, they’re also finding that the churn in their existing staff, the number of people leaving these firms, has not been keeping pace with recent trends. So they’re finding themselves heavily overstaffed and having to take action.

Joanna S Kao
How significant are these lay-offs?

Stephen Foley
Well, it’s difficult to get a handle on all of the different sizes of these things because they’re coming out in dribs and drabs. Now, of course, they’re concentrated in particular areas. The consulting business bore the brunt of those. And you know, the deals teams in particular, those that are advising on M&A, they can be in the double-digit percentages of numbers being laid off. I think one of the things that’s particularly interesting to me about the latest round of headlines, likely wise, is that we’re seeing second rounds of lay-offs and no one likes to do that. This is internally very disruptive. It’s not very good for morale, of course. So you want to be one and done, and that’s not how it’s playing out.

Joanna S Kao
So, Stephen, we’ve talked to you before about EY’s attempt to split its consulting and audit business. How do these lay-offs relate to that debate?

Stephen Foley
I think what these round of lay-offs really do demonstrate is just how different the audit and the consulting businesses are inside these firms. The consulting businesses are incredibly economically sensitive. They do have growth spurts at times when the economy’s growing very, very strongly. And they do shrink at times of economic uncertainty. That cyclicality is one of the reasons why the firms that decided to stay together, those that opposed that split, they say that the two sides balance each other and that when the consulting business is going through a difficult patch, as we are at the moment, the audit business continues to grow strongly and to be a robust source of profits for these firms.

Joanna S Kao
OK. So given all this, what’s the path forward for the Big Four after these job cuts and restructuring?

Stephen Foley
Sitting and hoping, I think. (Chuckles) We have a time of great economic uncertainty, right? We’ve got different economists looking at 2024 with very, very different predictions. Are we over the worst when it comes to inflationary pressures? Are we going to have a soft landing? There’s predictions of recession in lots of different quarters. So I think they’re just going to have to wait and see. They’re waiting on their clients to make decisions about how they want to move forward. And I think they’re hoping that with two rounds of lay-offs at this point, hopefully it’s two and done.

Joanna S Kao
Stephen Foley is the FT’s US accounting editor. Thanks, Stephen.

Stephen Foley
Thanks so much.

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Joanna S Kao
There’s a shift happening in the world’s biggest financial centres. The value of India’s stock market is about to overtake Hong Kong’s as the seventh-largest in the world. Analysts say that the rise shows growing investor confidence in the economic prospects of the world’s most populous country. Hong Kong, on the other hand, hasn’t fared as well. Share prices there have fallen as China’s economy has struggled.

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Life just isn’t the same as it was before 2020. And one part of society is feeling the effects of the pandemic, particularly hard: school-aged kids. Covid took a huge toll on education. The question now is: how will students recover? The FT’s Amy Borrett looked into this and she joins me now. Hi, Amy.

Amy Borrett
Hi, Joanna.

Joanna S Kao
So when we talk about the disruption of education because of the pandemic, what are we talking about?

Amy Borrett
So there’s a study run by the OECD, which is an international economic body, called the Pisa report every three years, although it’s delayed a year because of the pandemic. And what it does is test the performance across science, reading and math of 15-year-olds around the globe. And what it shows is a sharp decline in attainment across the world, with the majority of countries showing lower levels of performance in these core subjects than they did in 2018. This is especially true in developed countries with the average 15-year-old in the OECD lagging behind the students who took the test in 2018 by three-quarters of year in maths and half a year in reading.

Joanna S Kao
What’s the biggest contributor to the disruption? Is it just because of lockdowns?

Amy Borrett
Yes. So school closures are a big factor here. Countries where schools didn’t close for quite so long tended to be more resilient to the impact of the pandemic. But that doesn’t explain everything. How learning was organised when schools were closed was also really important. So schools that manage to support the students more and where students felt like they had more capabilities to learn independently tended to be more resilient. And actually students on the whole dealt better with the logistics of remote learning. So, for example, using video communication software than they did often with the motivation and their confidence in their ability to learn independently.

Joanna S Kao
So what happened when you looked at comparisons across countries?

Amy Borrett
There was a very varied experience depending on which country students were in. The most resilient tended to be the countries that always performed the best in Pisa, which are East Asian education systems such as Singapore, South Korea and Japan. On the other hand, the countries that tended to see the sharpest drop-off between 2018 and 2022 were Nordic countries such as Iceland and Finland. And it’s pretty hard to know exactly what causes this, but there are a number of underlying factors across developed countries that came into play long before the pandemic. And so things like, for example, teacher shortages, a lack of parental engagement, issues in terms of digital distractions with devices used in class. All these things are big factors across many of the leading economies and they’re issues that need to be addressed, if the economy is meant to kind of recover education standards, as well as addressing the loss of learning that happened due to school closures.

Joanna S Kao
OK. So Amy, how much of these rankings should educational systems take to heart and how much of the pandemic experience should dictate what countries do going forward?

Amy Borrett
So the pandemic is obviously an important factor, and the rankings are often used to inform policy. But the experts I talked to and the OECD themselves have pointed to the importance of seeing it in the light of all the other factors that are playing out as well. So countries are already starting to address those learning. For example, in Estonia, they’ve implemented an extra year of education for students who are struggling. And in Singapore, they’ve implemented blended learning so that students have a regular chance to learn autonomously, so they develop those skills. But it’s also important that things like the lack of teachers is something that’s addressed because those are affecting education outcomes. And even when lost learning is recovered from the pandemic, they’re gonna continue to play out.

Joanna S Kao
Amy Borrett is a data journalist at the FT. Thanks, Amy.

Amy Borrett
Thanks.

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Joanna S Kao
Before we go, one more story from the world of professional baseball.

Voice clip of sports commentator
. . . right-centre field. How far will this one go? Shohei Ohtani with a blast. It’s back to back . . . 

Joanna S Kao
Star player Shohei Ohtani has signed a record-setting deal, a 10-year contract with the Los Angeles Dodgers worth $700mn.

Voice clip of sports commentator
. . . incredible. Twenty-four home runs at the plate, picks up his 106th strikeout.

Joanna S Kao
The deal is nearly double the next-highest contract in Major League Baseball and dwarfs those from other professional sports.

Voice clip of sports commentator
Here, he never stops. Amazing. First pitch . . . 

Ohtani is considered a once-in-a-century talent in baseball, both as a batter and pitcher.

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You can read more on all of these stories at ft.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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