He is certainly ambitious. Not content with PricewaterhouseCoopers being Britain’s biggest professional services group, Ian Powell, its chairman and senior partner, wants it to be heard and admired beyond the sector, influencing policy and setting practices for others to follow. He doesn’t just want it to be big — he wants it to be “iconic”.
That will doubtless further irritate rivals at other Big Four accounting firms, who accuse PwC of getting carried away with its own spin. Hubris? Mr Powell is not deterred.
“You start to go backwards if you’re not going forward. We think this is a really good time to be positioning yourself.” A time, indeed, when many of the City’s leading institutions prefer to stay out of the spotlight as they try to rebuild their battered reputations. “Over the next few years, you will see PwC acting with a lot more confidence and visibility.”
Mr Powell, 53, is arguably Britain’s most powerful accountant. For all the talk this year about the pervasive influence of banks such as Goldman Sachs, PwC’s reach may be even broader — and probably less scrutinised. It is the biggest of the Big Four accounting firms, ahead of Deloitte, KPMG and Ernst & Young. Formed by the merger of Price Waterhouse and Coopers & Lybrand in 1998, it is one of the largest private organisations in the world, with $26 billion (£15.75 billion) in revenue and about 163,000 staff in 51 countries. Its British division signs off the accounts of 40 of the country’s 100 biggest companies and provides tax and consulting services to many of those that it doesn’t audit. On top of that, it advises thousands of smaller businesses across myriad industries and numerous government bodies.
Mr Powell’s contacts book is, inevitably, a who’s who of executives, finance directors, bankers, investors, lawmakers and regulators. Normally, you might expect this to be the product an old boys’ network, the kind of public school or Oxbridge background that can open doors denied to the rank and file — but not so in this case. Born into a Methodist family in Sedgley, in the Black Country, he studied economics at Wolverhampton Polytechnic. There are traces of a West Midlands accent and he is a fan of West Bromwich Albion. There is an undoubted everyman charm.
Yet there is a hard nose, too. After joining PwC as a trainee in 1977, Mr Powell cut his teeth as a corporate recovery specialist. His biggest job came in 2005 as joint-administrator of MG Rover, the failed carmaker. It required putting 6,000 people out of work, a grim experience that nevertheless would prove useful for running a business during a recession.
“One of the things you learn pretty quickly in the restructuring space is that you need to be decisive,” he says. “You don’t always make the right decisions but at least you’re making decisions and moving forward.”
Mr Powell — who is talking in his office on London’s Embankment, with impressive views over the Thames and along the river to Westminster — took control of PwC in July last year. Before that, he says, the firm had been drifting: “Our growth hadn’t been as strong as it should have. We hadn’t invested as well as we should have, we hadn’t delivered as we should have.”
In his first year at the helm, Mr Powell did what few executives can claim to have achieved during the recession, he increased turnover — if only slightly. PwC lifted full-year revenue by 1 per cent to £2.25 billion, maintaining its lead over Deloitte, its closest rival, which had fee income of £1.97 billion. Although fees from auditing and tax work declined, PwC received a boost from restructuring and insolvencies, including the administration of Lehman Brothers’ European division. That alone has generated more than £150 million in billings to date and, with years left to run, could end up being the most lucrative advisory role in the history of the City.
Mr Powell has defied the downturn by pouring money into expansion even as the economy tanked. He persuaded his 850 partners to take a pay cut to fund his plans, resulting in a 3 per cent drop in profit per partner to £777,000. Deloitte, by comparison, had profit per partner of £883,000.
PwC paid £3 million to acquire an environmental consultancy run by Leo Johnston, brother of Boris, the Mayor of London, and £2 million for a boutique recruitment business. It took on about 1,000 graduate trainees. Most dramatically, it announced plans to treble consulting revenues to £1.3 billion and recruit 2,000 consultants over the next four years, which sent shudders through the rest of Britain’s £9 billion consulting market.
Auditing remains PwC’s biggest line of business, comprising almost 40 per cent of its revenues (Barclays and Rio Tinto, two of its biggest clients, contributed more than £50 million in fees each in 2008), but consulting is seen as providing greater opportunity for future growth. This is a dramatic about-turn, given that PwC sold its original consulting business to IBM less than a decade ago.
Mr Powell argues that PwC is planning to handle the business differently this time. “There’s a misunderstanding about what we’re doing in consulting,” he says. PwC was involved in developing big, capital-intensive technology and systems integration projects, a market dominated by the likes of Accenture. That led to a power struggle between expansion-minded consultants, who argued for more capital, and risk-averse auditors, who feared that the consultants were gambling with the firm’s balance sheet. This time, Mr Powell says, its consultants will stick to providing advice.
Several more small acquisitions are planned, although Mr Powell will not elaborate. One area that he is expecting to boom over the next few years is health, with restructuring of the NHS inevitable as the Government looks to cut back on publicsector spending.
Even bigger will be environmental consulting. “Sustainability is possibly the most important thing we’re going to have to deal with over the next 30 to 40 years,” he says. “I don’t think there are going to be any business decisions in the coming years that won’t in some way touch on it.”
There is no accepted mechanism for assessing and monitoring companies’ effect on the environment. That’s where the accountants will come in. Mr Powell predicts that water usage and carbon emissions eventually will be disclosed routinely alongside financial performance; preparing and auditing those disclosures could become a huge business for the Big Four.
But shouldn’t we, Britain, the public, be worried about PwC getting even bigger? Critics claim that the Big Four are already too powerful. Mr Powell rejects the characterisation of the big firms as a cartel. Competition between them is intense, he says. “I do find it strange when you get the challenge that there’s not enough competition. There’s not many global industries where you’ve got four major competitors. Is there enough competition in oil and gas? Is there enough competition in pharmaceuticals?”
Mr Powell, who earned £3.3 million last year, is expecting PwC’s revenues to be flat for the rest of this year. The firm will continue to sacrifice profitability to fund expansion.
On the economy generally, he has been feeling increasingly optimistic lately that the signs are improving. “Talking to people out there in business — particularly to people in industries like retail that are at the sharp end — there’s actually a bit more confidence about,” he says.
“One client I was with yesterday had seen an increase in activity for each of the last ten months. At first they were asking themselves: ‘Is it just a blip?’ But actually things keep getting better. They’re feeling more confident than they would have been three months ago.”
He is worried that banks are still not lending, which has left many companies focused on short-term survival when they should be planning for growth beyond the recession. He points out that in previous recessions the number of insolvencies increased after the economy started to pick up. “It’s a worry. It could cost the economy pretty dear in a few years’ time.”
He is also concerned that Britain’s massive public debt could also hamper its competitiveness. “ “There’s going to have to be a lot of creative thinking about how we’re going to address that without damaging the fabric of the economy.”
It hardly needs saying that, whatever the Government decides to do to tackle it, Mr Powell intends PwC to be involved.
Q&A
Who is your mentor?
I’ve never really had a single mentor. I’ve been lucky during the course of my career that I’ve come across different role models at different points
Does money motivate you?
No
What was the most important event in your career?
Joining Price Waterhouse in 1977. I was a pretty raw economics graduate and somehow they saw enough to give me a job
Which person do you most admire?
Warren Buffet, because he’s authentic
What gadget must you have?
It’s got to be the BlackBerry
What does leadership mean to you?
It’s about setting a clear goal and creating the environment to achieve it
How do you relax?
Driving, family, sport. I’ve got a classic Aston Martin DB5. When you get back to driving something that is 40-odd years old and remember what it was like to drive without computer assistance, that feels kind of raw and you don’t have to be going fast to enjoy it. On the sports side, I said relax, but it’s common knowledge I’m a West Brom fan. I wouldn’t say watching West Brom is particularly relaxing
CV
Born: March 16, 1956, Sedgley, West Midlands
Education: High Arcal Grammar School, Sedgley; Wolverhampton Polytechnic, BA (Hons) Economics, 1974-77
Career: 1977: joined Price Waterhouse as a trainee; 1991: became a partner; 2000: head of business recovery; 2006: joined board; 2008: elected chairman and senior partner
Your Comments
Order By: