Good morning This article is an onsite version of our FirstFT newsletter. Sign up for our Asia, Europe/Africa, or Americas edition to get it straight to your inbox every weekday morning
EY’s global boss said dissolving the Big Four firm would net its consulting division up to $10 billion in additional fees by freeing it from conflicts of interest that block partnerships with the world’s biggest tech giants.
Pressure is mounting for the accounting firm to decide whether to make a historic split as its global leaders meet in New York this week and its competitors continue to cling to its model of combining auditing and advice.
EY dominates the auditing of large US tech companies, auditing the accounts of Amazon, Google, Oracle, Salesforce and Workday.
In an interview with the Financial Times, Carmine Di Sibio, EY’s global chair and chief executive, said the company’s position in the technical audit market was “both a blessing and a curse.”
While his strength for the auditing business was a positive, Di Sibio said it was also “negative” as it meant conflict of interest rules prevented EY from forming alliances to work with some of the world’s largest tech companies on projects for their other clients.
Over time, the standalone consulting business would gain between $5 billion and $10 billion a year in consulting fees, which are currently “off the table” because conflict rules prevent it from working with companies like Amazon or Salesforce, he added.
EY’s global executives are meeting this week, but the firm is yet to make a final decision on whether to proceed with a split that would mark the biggest shock to the accounting industry in two decades. “It would reshape the industry,” Di Sibio said.
He said he expected a decision “in the next few weeks or so.” Partners in all EY national member firms would then vote on a split, most likely in October or November, he added.
Five more stories in the news
1st Judge in Twitter Musk Accelerated Trial Chancellor Kathaleen McCormick has set a timeline for an expedited trial to begin in October and sided with Twitter in his legal battle against Elon Musk. It was an early win for Bill Savitt, the Rockstar litigator hoping to bring Musk down. Would a long wait have jeopardized Twitter’s business? Share your thoughts in our latest poll.
-
go deeper: Pictures emerged on Monday of the Tesla boss partying on a yacht in Greece. Just 24 hours later, the judge canceled his vacation, writes Sujeet Indap.
2. Netflix loses 1 million subscribers The streaming leader continued to lose subscribers in the second quarter but tried to allay investor fears about its business prospects. The loss was less than Netflix’s forecast of 2 million users who would terminate their accounts as the company was helped in part by the release of a new season of the hit series Stranger Things.
3. BoE and ECB discuss half-point rate hikes Bank of England Governor Andrew Bailey has raised the possibility of raising interest rates by half a percentage point at the next central bank meeting in early August. UK inflation rose to a new 40-year high of 9.4 percent in June, confirmed earlier today. Bailey’s comments come as the European Central Bank plans to raise interest rates by the same amount this week.
4. JPMorgan Acquires Direct Lenders With Leveraged Loan Unit JPMorgan Chase’s investment bank allocates a “significant portion of capital” to hold leveraged loans on its balance sheet. The bank began lending in 2021 and has closed about 20 deals ranging in size from $50 million to about $500 million, Kevin Foley, JPMorgan’s head of global debt capital markets, told the Financial Times.
5. Ukraine and Russia are nearing an agreement on the grain blockade The sides are close to agreeing a deal to ensure safe passage of millions of tons of grain through the Black Sea, but remain at odds over the safety of ports and ships along the crucial food export route, according to sources familiar with UN leaders people negotiations.
The day ahead
corporate profit The electric car manufacturer Tesla will present the quarterly results after the market close. Earlier this month, the company reported parts shortages and production shutdowns at its Shanghai plant, causing vehicle shipments to fall. United Airlines, Abbott Laboratories, Nasdaq, CSX and Harley-Davidson also report.
economic data Canada’s CPI is expected to rise to 8.4 percent in June after hitting 7.7 percent the previous month, the fastest pace in nearly four decades. In the US, existing home sales are expected to have declined for the fifth straight month to 5.38m in June from 5.41m in the previous month on a backdrop of rising mortgage rates and record prices weakening demand from potential buyers.
market prospects US stock markets are expected to continue a rally when they open later, after posting their strongest performance in a month on Tuesday. In Europe, equity markets remained flat as investors offset worries about the economic outlook with stronger-than-expected earnings from Netflix.
Tory lead race The fight to succeed Boris Johnson will be reduced to two candidates today. Trade Secretary Penny Mordaunt and Secretary of State Liz Truss will fight over who will compete in a head-to-head battle with former Chancellor Rishi Sunak. The new leader will be appointed on September 5th.
Live Q&A: What’s next after the crypto market crash? FT Markets News Editor Adam Samson and Digital Assets Correspondent Scott Chipolina answer readers’ questions throughout the day on FT.com. Submit your question at the end of this story.
What else we read and hear
US consumers are bowing but not breaking as prices rise. Can it last? Hopes have increased in recent days that the Federal Reserve could stage a soft landing for the US economy. Jamie Dimon said this week the consumer is in “great shape”. Executives from Burberry to Kroger have welcomed the continued appetite for pricier items. But tension tendencies are also discernible at the other end of the income scale. “The difficulties ahead are somewhere in the middle of next year, not sometime in the next six months,” said one banker.
Why young investors are not ready to give up the risk After struggling to amass wealth the traditional way over the past decade, many do-it-yourselfers are speculating in riskier corners of the financial markets despite the collapse of cryptocurrencies. Having grown up after the financial crisis, they no longer want to play by the old rules.
Western democracies have a talent problem Rishi Sunak engages in politics as if he just returned from a course called How to Do Politics. In the US, the two longest-serving Democrats are a retiree and his clumsy vice president. The last election in Germany was an unassuming spectacle, and none of Australia’s last six prime ministers has impressed enough to stay in office for four years. Able people with liberal or moderate leanings don’t go into politics, argues Janan Ganesh.
Hot Money: Inside Porn’s Star Chamber In the season finale of the FT’s Hot Money Podcast, Alex Barker and Patricia Nilsson discover how Visa and Mastercard reluctantly became the rulers of porn and examine what the influence of credit card companies means for the industry today.
Hong Kong animal shelters are full Hong Kong charities are conducting an online campaign blitz as they struggle to dump the animals they received following an exodus of residents from the city. The tightening of already-tight Covid-19 restrictions has seen people pack their bags forever – and leave their furry companions behind.
Property
Dan Shannon, managing partner of New York architecture firm MdeAS, has earned a reputation as one of the city’s leading practitioners of what architects and developers call ‘repositioning’, or breathing new life into old buildings. He spoke to Josh Chaffin about the redevelopment of some of New York’s landmarks.
Most recently, Dan Shannon led the project to revitalize the Black Rock building on Sixth Avenue
Thanks for reading and remember you can add FirstFT to myFT. You can also opt to receive a FirstFT push notification in the app every morning. Send your recommendations and feedback to [email protected] Sign up here.
Recommended newsletters for you
troubled times — Documenting the business and economic changes between Covid and conflict. Sign up here
Work on it — Discover the big ideas shaping today’s workplaces with a weekly newsletter from Work & Careers Editor Isabel Berwick. Sign up here
Comments are closed.