Our goals evolved slightly as we found ourselves leaving the EU, which I don’t think we all expected. There was a period over the summer last year dealing with the uncertainty that caused, and keeping the confidence in the business, to make sure it was fit for the future. It was quite an eventful year. But we have launched our strategy and our strategy is no different than it would have been without Brexit. We’ve got probably the strongest regional footprint of the Big Four firms and that’s an asset. It’s not about leaving London it’s about ensuring the gravitational pull that happens in this country towards London is balanced with the gravitational opportunity in other regional centres.
On education and skills
I go back to Nottingham University every year for the milk round. Last year it was noticeable how few people were talking about coming to London. They were talking about Leeds, Manchester, Bristol… And last year our graduate recruitment outside London was 62% of our graduate recruits.
Our new technology degree [an apprenticeship for 80 students with the University of Birmingham] got a huge amount of interest this week. We’re trying to set it up as something that other people can follow because it will make a difference. For PwC to be competitive as a business we have to lead on technology talent. And you’ve got to do your bit in terms of training. It’s a small contribution but people do follow us because we’re a big B2B player, a big talent magnet, and our people see what we’re doing.
Last year was the first year of non-UCAS filtering: 38% were the first in their family to go to university, 73% were state schools, 14% were income support families, 9% were free school meals. We’ve created this data from 100,000 applications a year, and that helps. The technology degree and supporting apprenticeships will help with balance and help change a misperception of the profession as being elite.
There’s a danger that people see it as fear; technology will take my job. I can’t predict what will happen with AI and robotics, we’re all at the beginning of the gold rush, but to go into it being a denier is a mistake – it’s an opportunity. If we don’t disrupt ourselves someone will disrupt us. Technology changes what you deliver: we’ve got a product called Skyval, which allows you to measure pension products on a real-time basis. There’s a massive pension deficit: one of the things you’re trying to do if you’re an FD is hedge against the risk of market movements, which is hard if you can only value once every three years, or it takes you six months to value. If you can do it in real time, it means you can do a perfect hedge. It makes life easier. You can only do it with technology, you couldn’t do it with lots more people. It’s an enabler.
On business uncertainty
It started to affect us from March 2016 – we are only a mirror image of our clients and the uncertainty our clients feel about their business prospects and in terms of hiring people, training, all of those issues, that affects us as well. After the general election, people are asking what it means. That isn’t good for business because it affects investment – there’s a lot of money around and for the next few months they’ll wait and see. Countries are only as strong as their economy, their job market, their ability to collect taxes…. But as a firm, we’ve been going for 167 years, the economy has been pretty resolute and you will have uncertain times. So you’ve got to stay close to your clients, they will need advice, but the economy will come through it in the end. It won’t be about politics it will be about business, jobs, taxes, wellbeing…
On mandatory audit rotation
We started off at 40% so mathematically we knew we were going to fall. The important thing for us was to treat all clients as clients, and made sure where they wanted us to be auditors we pitched for the audit, and where we could no longer be auditors because the time had elapsed, then we kept the relationship in channel 2 (non-audit work). Undoubtedly there’s a cost to it because we’ve tendered more in the last two years than we’ve ever tendered, and in some cases relationships we’ve had for years have had to go. But if those relationships transfer from strong relationships as auditors to strong relationships in tax or consulting, that builds trust in the brand.
It’s about making sure we have the quality that people require of an auditor; that’s at the heart of everything. I think – and we’ve had this debate with regulators and investors – you want people to want to be auditors, and the very best auditors. Mandatory firm rotation plays to that. If you’d gone the other route, of an audit only firm [rather than a multidisciplinary firm] I don’t think it would have been as attractive for the top quality people because you wouldn’t have got the diversity. Audit of a company requires a real deep understanding of that sector, so the support they can get from the consultants who understand that sector is important to doing audit properly and to a high standard.
The trouble is getting the message across. When something goes wrong, someone is to blame and you end up in a blame culture. We sign around 1,000 audits a year and the ones you hear about, the high-profile ones, are the ones where we’re questioned on them. It’s right to be questioned, and answerable to regulators, but nobody will ever say about all the ones that go right. There will be audits where a challenge creates a more transparent and a correct outcome for investors and for society, but that doesn’t become the newsworthy item.
That doesn’t help the trust debate. I think there’s a responsibility on all of us to actually explain what we do. I think there’s a misperception of what an auditor actually does, and there is a view that business is only out there for business. At the end of the day, the taxes that pay for education, hospitals, social welfare and so on come from business. We want a vibrant private sector, jobs created, to be competitive in the global world. And that requires business to be trusted and at the forefront. Sometimes that message doesn’t come across. A vibrant economy requires a vibrant business world.