CEO review of the year
Richard Houston
Senior Partner and CEO, Deloitte UK and Deloitte North and South Europe
Welcome to our FY20 Annual Report - a year where we have seen people, businesses and our economy face the most significant and unpredictable challenges in decades.
When the COVID-19 crisis hit in March this year, our immediate priority at Deloitte was the health and safety of our colleagues, and we transitioned over 20,000 people to remote working in just four working days. At the same time, we took decisive steps to protect jobs and the long-term stability of our firm.
Now, as we respond to and recover from the crisis, our focus is on the consequences of the pandemic, how it impacts all aspects of our own business – our people, our clients and our operations – alongside the impact on society itself.
Before COVID-19 there were four key trends in the market. There was huge economic uncertainty, increasing use of disruptive technologies, regulatory pressures across all industries, and significant societal change. And as we live with (and hopefully move beyond) this pandemic, there is economic uncertainty unlike anything we’ve seen before, a bigger role for government to play in business and the merging of public and private sectors.
Our new ways of working have accelerated the adoption of new technologies. And there is a growing sense of the importance of societal responsibility and a shift in consumer behaviour that reflects this.
Our purpose and role in society
This importance of societal responsibility is embedded in our firm’s purpose – to make an impact that matters for our people, our clients and our communities. The stories you’ll read in this report bring that impact - and the difference we make - to life.
The role of business in our society has never been more relevant. And I believe that our firm has a responsibility to help rebuild trust – whether that’s in our country’s capital markets – or in business itself.
This responsibility is reflected in the investment we make in our people and our commitment to equality and inclusion. It is reflected in the support we give to social enterprises and charity partners to give education and employment opportunities to those who need it most. And it is reflected in the way we serve our clients with quality and integrity.
That’s why the recent Financial Reporting Council Tribunal ruling against Deloitte UK was so disappointing. In the FRC’s investigation into our financial reporting work for Autonomy between 2009-2011, it ruled that aspects of our audit work fell below professional standards expected. We completed our auditing of Autonomy over a decade ago and since then we have significantly evolved our audit practices, investing in firm-wide controls, technology and processes.
And we remain committed to much-needed reform in financial reporting to improve audit quality, increase choice and restore trust. We’ve consistently said that we’d support regulatory changes that improve the effectiveness of the UK’s corporate governance system, whilst not endangering the reputation of the UK as a stable and attractive place to invest. As such, we have accelerated enhancements to our own governance to ensure we adopt and operate the FRC principles for operational separation ahead of the deadline of 1 June 2021.
Responding to COVID-19
We took a number of actions during FY20 to build resilience and protect jobs and our firm as the crisis hit, including suspending salary increases and reducing promotions. Over the year we saw a balanced performance across our businesses and industries, with revenue growth of 9.1% although distributable profits were down 16%. Our pipeline of work remained strong but, like many other businesses, we will continue to feel the impact of COVID-19 as we enter FY21.
While the pandemic has created clear challenges, we, along with many organisations, are using this time to think about the business we want to be in the future. How can we simplify and transform what we do? How can we make more of a positive impact? How can we change the way we work? For the benefit of all of our stakeholders, we must take this opportunity to change our business for the better.
And we’re doing that in several ways. Firstly, in a world of limited resources, we’re focusing on what matters most: looking after our people and serving our clients.
Secondly, we are staying true to our purpose and acting in the public interest. Our impact on society has never been clearer or more visible than during this crisis – and I want this to live on as we support our nations and our clients to recover.
Thirdly, we’re acting with agility to meet clients’ changing needs - whether that’s transitioning thousands of people to remote working or making important acquisitions that mean we can better respond to the major trends driving change and opportunity in our markets.
And lastly, we are collaborating in new ways. Not only using new technologies but also just simply working across businesses and borders as part of Deloitte North and South Europe.
Looking ahead - shaping the future of the UK
Over my 20 years with Deloitte I’ve experienced major events from the dotcom bubble to the 2008 financial crash, but what I’ve seen our firm and our people achieve in the past six months is extraordinary.
Throughout this pandemic our people have responded - finding new ways to connect and support each other, giving up time and money to ensure charities and social enterprises can support those most in need, and ensuring that our clients - who employ thousands of people and deliver critical national projects - can continue to operate in the most difficult of times.
As we now look to a world beyond COVID-19, our focus is on what our firm can continue to do to help build the skills the UK will need to ensure a sustainable and - just as critical - inclusive recovery.
The market and societal shifts caused by the virus – and indeed Brexit - will undoubtedly be significant. We in business and those in government will need to work together to invest in people at all stages of their lives to maximise their potential and ensure the UK has the much-needed skills to thrive. Changes in work patterns, including more international virtual collaboration, increased automation, distance learning and potential future downturns means we’ll all rely more on digital skills, and our Head of People & Purpose Dimple Agarwal explains how we’re contributing to education and skills.
This crisis has demonstrated the difference business can make to some of the biggest challenges the country faces. I know that Deloitte has a role to play as part of this - building trust in business, enabling sustainable and inclusive growth, and enhancing skills, education and inclusion for all.
Richard Houston
Senior Partner and CEO, Deloitte UK and Deloitte North and South Europe