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A Year of transformation

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ACHIEVING GREATER
THINGS FOR CLIENTS

“Our performance this year reflects the first phase of our journey to transform KPMG in the UK. Our aim is to dominate professional services by being so focused on our clients’ needs that they always turn to us first, by becoming a magnet for the best and brightest talent, and by acting as a powerful enabler of social change.”
Read the chairman's statement

Simon Collins

Chairman and
Senior Partner
KPMG in the UK

key facts

PROFIT

£455m
(2012: £358m)
+27%

REVENUE

£1,814m
(2012:£1,806m)
+0.4%

TOTAL TAX PAYABLE TO HMRC*

£702m
Total taxes paid £101.4m
* Total taxes collected as agent £600.2m

Audit contribution

£178m
(2012: £154m)
+16%

Tax contribution

£140m
(2012: £141m)
-1%

Advisory contribution

£308m
(2012: £268m)
+15%

Average Partner Remuneration

£713k
(2012: £580k)
+23%

UK EMPLOYEES

10,752
(Average excluding partners
for FY 2013)
-4%

EMPLOYEE BONUS POOL

£73m
(2012:£61m)
+20%

Partners

583

AVERAGE PARTNER AGE

47
(2012: 47)
Based on average at the end of FY 2013

NUMBER OF UK OFFICES

22

Community support

968 ORGANISATIONS
SUPPORTED

how we
generate value

Clients are at the heart of everything we do. Our depth of market and industry knowledge enables us to bring a breadth of expertise and insight to their challenges, whether it be exploring new paths to growth or helping them take a long-term view of the risks and opportunities they face.
  • Who we are

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  • What we do

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  • How we do it

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Who we are

KPMG in the UK

We are the UK firm within the KPMG global network, operating from 22 offices across the country.

KPMG in the UK aims to be a magnet for the brightest talent, with people so focused on our clients’ needs that clients always turn to us first and we, in turn, act as a powerful enabler of business and social transformation.

Using our skills in increasingly dynamic ways helps organisations we advise prosper and grow, which brings opportunities for them, for us and for wider society.

Who we are

Our Values

The KPMG values are at the centre of all that we stand for. They are the guiding principles of ethical behaviour which KPMG member firms adopt and require people to adhere to.

/ We lead by example

At all levels acting in a way that exemplifies what we expect of each other and clients.

/ We work together

Bringing out the best in each other and creating strong and successful working relationships.

/ We respect the individual

Respecting people for who they are and for their knowledge, skills and experience as individuals and team members.

/ We seek the facts and provide insight

Challenging assumptions, pursuing facts and strengthening our reputation as trusted and objective business advisers.

/ We are open and honest

Sharing information, insight and advice, frequently and constructively and managing tough situations with courage and candour.

/ We are committed to our communities

Acting as responsible corporate citizens and broadening our skills, experience and perspectives through work in our communities.

/ Above all we act with integrity

Constantly striving to uphold the highest professional standards, provide sound advice and rigorously maintain our independence.

Who we are

DIVERSITY AND INCLUSION

We are focused on creating a culture that attracts people of the widest diversity of backgrounds, attitudes and skills. While our record is relatively good against other professional services firms, like many of our peers we still have more to do, for example in relation to flexible working in client-facing roles. But increasingly we are looking at diversity and inclusion in a much broader way, and are doing so at Board level. In May 2013 we launched a reciprocal mentoring programme – pairing each Board member with a high performing individual in the business that possesses different diversity characteristics. While the individual benefitted from the insights received from senior leaders, equally Board members benefitted from “standing in someone else’s shoes”.

Our ten employee networks have also gone from strength to strength, with member numbers growing in London and the regions. We staged successful events, involving KPMG partners, colleagues and clients. In March, more than 170 guests gathered to celebrate ten years of Breathe, our LGBT network and in September over 100 members and guests of KPMG’s faith networks came together for our “Making it in business without losing it in life” event.

Who we are

Diversity in our skills

Our people come from all walks of life, bringing immense depth of skills including from industry, education, the public services and policymaking that we need to create value for our clients.

Professor Hilary Thomas, Partner, KPMG in the UK

Hilary - a former Professor of Oncology and a hospital and private sector Medical Director - joined KPMG in 2009 and is now the senior clinician lead in our healthcare and life sciences advisory practice. Hilary brings an invaluable perspective on the growing convergence between healthcare and the life sciences.

Alistair Buchanan, Partner, KPMG in the UK

Alistair Buchanan recently returned to KPMG having trained here in the 1980s. For the last 25 years he has been immersed in energy and utilities, working as lead analyst for the electricity companies during privatisation, as a top investment analyst in London and New York, and, for the last 10 years, as CEO of the UK energy regulator, Ofgem. With the debate over future energy policy intensifying, Alistair has rejoined the firm at a critical time.

Konrad Smelkovs, Manager, KPMG in the UK

Konrad Smelkovs is a Manager in Risk Consulting and lives and breathes cyber security. He helps clients identify weaknesses in computer security and to develop strategies to counteract this growing risk. His passion for security he claims was ignited in the early days of the internet when the only accessible online documentation on security was information on how to hack computers.

What we do

Sustainable business success

Our clients comprise a wide range of organisations across the public, private and not-for-profit sectors; from small entrepreneurial start-ups to some of the largest multi-national organisations. Whatever their size and complexity, we organise ourselves so that we can tackle the issues that matter to them most.

We have a vital role to play in re-building trust in business, showing – through actions and not just words – that responsible business is a vital part of building long term success.

It is a virtuous circle: empowering our people to be the best they can be, empowering our clients to contribute to the fullest extent of their capabilities, and empowering society so that we can use our combined skills to create shared value.

What we do

WORKING WITH CIVIL SOCIETY

KPMG works with a great many of the organisations and institutions that help make Britain what it is.  Through our audit work alone, we play a vital role: for example, in the academic world we work with leading educational and research institutions such as the University of Oxford and King’s College, London, and, in the world of broadcasting with the BBC, ITV and Channel 4. 

In the world of public health and welfare we work with a number of NHS Trusts and leading NGOs including Age UK, Comic Relief, Marie Curie, Cancer Research and Save the Children.

What we do

Working with small
businesses

Our Regions business looks after the thousands of regionally based organisations that are the backbone of the UK economy. We view these clients – those that range in size from small start-up businesses, SMEs, regional public sector bodies, right through to some FTSE 250 and AIM-listed companies – as vital not just to our success but that of the country as a whole.  As the economy recovers they will be a real engine of economic growth and employment. We know that if we provide them with the right support today, they will grow to become the big corporations and major employers of tomorrow.

The business is divided into five areas – Scotland, the North, the Midlands, the South and London. Through a network of 22 offices across the country we are able to stay close to our clients on the ground, gaining invaluable insights into their individual issues and needs. We have a strong tradition of cross-functional working across the firm, but we are accelerating our efforts to work as “one- firm”, drawing on the full breath of our capabilities.

What we do

WORKING WITH GOVERNMENT

The needs of the public sector clients are changing rapidly as leaders across the sector grapple with a challenging fiscal outlook.

This year, we have been proud to advise on leading government policies and reform programmes. We have worked with the Ministry of Defence reviewing their spending on defence equipment, with the Ministry of Justice on transforming the probation service and with the Police Service of Northern Ireland to support the business case, design and implementation of the force’s affordability programme.

In relation to Healthcare, pressure to meet rising demand, improve clinical outcomes and address increasing costs is placing the UK healthcare system under real stress. Our healthcare team, the fastest growing part of our public sector business, undertakes wide-ranging work across the system supporting the development of policy and regulation, developing the skills and capabilities of commissioners and enabling providers to strategically and operationally redesign their services. Working with the NHS Leadership Academy, we are leading a consortium of international organisations delivering a major programme of leadership development across the NHS in England.

How we do it

Playing a leading role

We aim to be the most relevant professional services firm for our clients, the one they turn to first for support and advice in overcoming their biggest challenges. Our training, leadership development and reward programmes are all geared to helping our people, at every level, fulfil that promise to our clients every time they work with them.

But it is vital that we also play a leading role in the business and social issues of the day, working closely with regulators, policymakers and civil society organisations to shape thinking on issues as diverse as taxation, infrastructure investment, financial reporting, social mobility and cyber security.

How we do it

Working with
our regulators

Audit remains the foundation stone of our business; our professional reputation rests on providing assurance of the highest quality. It’s the heartbeat of what we do. Trust can take decades to build yet can be lost in seconds, so we hold ourselves to the highest professional standards.



Like other financial businesses we have a duty to help restore trust in the markets. We aim to play a constructive role in developing effective regulation for our profession and for the wider business community.



We do this by sharing our experiences with regulators, such as the Financial Reporting Council (FRC). Furthermore, we use our convening power (such as the KPMG Audit Committee Institute) to bring together audit committee chairmen and the FRC in order to promote regulatory initiatives and good practice within the corporate community. We reflect responsibly on new regulation, complying not just with the wording, but also with the spirit of the regulations and encourage our clients to do likewise.

How we do it

Broad recruitment avenues

As a professional services firm, people really are the heart of our business. We have opened new entry routes into KPMG so that people from a broader range of age groups, skills and backgrounds can join the firm. Actions we are taking include:

/ Work experience opportunities for local Tower Hamlets children and mentoring activity in the Hackney City Academy.

/ Our pioneering six-year Audit School Leaver programme which has recruited 375 students since it began in 2011. Our students work, train and earn with us while working towards a top tier university degree and the Chartered Accountancy qualification.

/ The KPMG STAR programme is an internship scheme offering A-Level school-leavers from less-privileged London boroughs 11 month’s paid work experience. This internship has been running successfully in London since 2010. A STAR will rotate around the business, supporting on a range of internal and client facing projects. Their success, and the quality of work provided has led to 32 of our 59 STAR alumni securing permanent roles within KPMG.

‘‘Being on the STAR programme for just over a month now, it is unbelievable how much I am enjoying it and how much I am gaining from it. The corporate world of work – little did I know it would be this intriguing. I’m overwhelmed to see what’s coming over the next 10 months.’’ Athaur Rahman, STAR, 2013

For over a decade, the KPMG Foundation has improved the futures of disadvantaged and under privileged children in care through education and social projects.

How we do it

Developing our people

We can only achieve our ambition if we create a dynamic and creative work environment where the brightest and most talented people want to work, develop and achieve their best – for themselves and for our clients. This year we spent over £23 million in developing our people in the technical and leadership skills required to help deliver our strategic goals to create a market-focused and issues-led business.

Our global approach to personal development, based on the principles of 70/20/10 – is all about gaining real practical experience, with 70% of learning originating in the workplace, 20% learning through others and 10% in the classroom. As part of that effort we are continuing to offer people the chance to take up assignments and secondments overseas, to broaden their commercial and cultural experience.

In 2013 KPMG ran a total of 4,166 individual courses which amounted to 432,113 training hours or 83,330 individual learning experiences over the year.

HOW WE ADD VALUE

  • TECH CITY

    TECH CITY

    KPMG’s High Growth Technology Group provides a dedicated team to support early stage and high growth UK tech companies.
    Play
    View transcript
  • The future
    of banking

    The future
    of banking

    Bill Michael, Head of Financial Services, talks about the future of the banking industry and the role of KPMG.
    Play
    View transcript
  • KPMG as a
    responsible
    business

    KPMG as a
    responsible
    business

    Marianne Fallon, Head of Corporate Affairs, talks about responsible business and KPMG’s role in society.
    Play
    View transcript
  • Audit Reform

    Audit Reform

    Tony Cates, Head of Audit, talks about corporate reporting and the important role of KPMG in restoring trust.
    Play
    View transcript
  • International
    Corridors

    International
    Corridors

    KPMG’s UK High Growth Markets Group, individually focuses on key markets such as China, Brazil, India and Africa.
    Play
    View transcript
  • Advisory

    Makinson Cowell

    Simon Collins and Bob Cowell talk about KPMG’s acquisition of Makinson Cowell.
    Play
    View transcript
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Back

ACHIEVING GREATER
THINGS FOR CLIENTS

“Our performance this year reflects the first phase of our journey to transform KPMG in the UK. Our aim is to dominate professional services by being so focused on our clients’ needs that they always turn to us first, by becoming a magnet for the best and brightest talent, and by acting as a powerful enabler of social change.”

Simon Collins

Chairman and
Senior Partner
KPMG in the UK

“ Transformation” is the word which comes immediately to mind as we map out the new direction for KPMG in the UK. And at the end of a challenging but successful year, it also describes the huge improvements we have made to our finances, governance and our market-effectiveness.

It is still early days and there is a great deal more to do.This process of change will take three years to complete as we work towards our strategic goal to dominate professional services in the UK.

But at the end of the year I believe we are already a more confident organisation, more sharply focused and more ready to step out together to bring real benefits to our clients, our people and to society at large.

OPERATIONAL EXCELLENCE

What we have achieved for our own firm this year is exactly what we have been helping our clients achieve during the long, hard years of recession that followed the financial crisis. We have restructured our cost base, thereby boosting our efficiency and positioning us strongly for profitable growth as the economic environment improves.

Our financial performance was strong in 2013. We achieved a marginal growth in revenue of 0.4% and a substantial double digit growth in profitability. Our bonus pool to staff increased by 20%. This improvement in profitability positions us strongly relative to the other Big 4.

However, the pride in this result is not about profit for its own sake. This performance allows us to invest in new businesses that will deepen our specialist skills and make our client proposition all the more compelling, as we did with our acquisition of Makinson Cowell, one of Europe’s leading equity market advisors, in June 2013.

Most importantly of all, it enables us to do even more for our clients, who rely on us to support and challenge them in pursuing new growth opportunities in an uncertain economic environment.

Achieving the turnaround involved some very tough choices,including reducing our headcount by 4% year on year with a corresponding reduction in staff costs of £45 million.

But while living through structural change on this scale has undoubtedly been difficult, it has paid off in one very important sense. It means that the step change in profitability we have achieved can, if we remain vigilant, be a permanent feature of our finances.

ONE FIRM

We have long realised that the key to success is to act as one, cohesive firm, bringing the full range of our specialist, multidisciplinary skills to bear for the benefit of our clients.

Acting as one firm manifests itself in many ways. You can see it most clearly in the advice we give on the pressing issues of the day. For example, we have built what we believe is the leading cyber security team, drawing on talented people across our Advisory, Tax and Audit functions, and are leading our profession in advising both the UK government and many of the UK’s largest businesses on how to tackle this growing business risk.

Creating a sense of shared purpose in the firm starts with our leaders, and another priority during the year was to build a greater sense of sovereignty and cohesiveness to the partnership.

Reconfiguring partner pay has played a central role in encouraging a one firm mindset and long-term approach. The partners overwhelmingly supported the reforms we proposed and were pleased to make the pay methodology changes before the start of the new financial year. My own pay was also put to the vote. Together with other changes to the governance of the firm, including the election of non-executive members, we have created a more democratic partnership and one which can now concentrate, as it should, on our purpose in the market, our success as a firm, our roots and our effect on society – the sort of legacy issues so important to our longterm success.

As evidence of that, we have taken the decision to ring-fence some of our profits to invest in new businesses that will add to our capabilities in key areas, such as data and analytics, further strengthening our competitive position.

CORRIDORS TO GROWTH

The UK economy is finally showing tentative signs of growth. But it is important to put this into context. Five years on from the financial crisis, UK GDP remains some 2.5% off its previous peak and the expected 1.4% and 2.4% expansion of growth this year and next is meagre and by no means assured. With the exception of Germany, the Eurozone continues to be stuck stubbornly in a low growth cycle, at very best. US recovery has been stronger, but remains susceptible to political uncertainty of the sort seen in the intractable debt ceiling debate.

All this matters at a time when our clients are once again feeling a sense of cautious optimism about the future, tentatively exploring transactions and looking for routes into new, faster growing markets.

Yet historical choices by business and policymakers have left us in a position where less than 10% of UK exports are destined for the 10 fastest growing emerging economies. With current trends suggesting that emerging markets will account for about 60% of global GDP by 2025, that balance needs to shift and, working closely with other KPMG member firms across the world, we have an important role to play in opening new corridors to high growth markets for our clients.

KPMG EUROPE LLP

In the last five years we have learnt some important lessons about serving client needs through the creation of KPMG Europe LLP (“ELLP”) including the huge benefits we can bring when we work seamlessly across borders to support our global clients, wherever they are operating.

Building on these lessons and ensuring we focus our efforts on the market dimension of our European structure, we are now driving the KPMG region covering Europe, Middle East and South Asia, and Africa (“EMA”) in a more dynamic way, drawing on our full expertise in all the important economies in this zone to create a powerful regional presence in Europe, in Africa and in the Gulf. By transitioning ELLP to this optimised EMA region we will be much better placed to work with colleagues across KPMG's global network to help clients establish those much-needed routes into new markets like India, China, the Middle East, Africa and Latin America.

CYBER

Cyber security is one of the biggest challenges we face today. Foreign countries and companies are targeting businesses to extract intellectual property and other competitive data and criminals are adopting online tools to commit crime.

We are a leader in helping to improve defences against the constantly mutating threats. We have built a UK team of over 200 cyber security specialists that is growing rapidly to meet an exploding demand from our clients. Businesses need to innovate to stay ahead of constantly changing attacks by sophisticated adversaries; collaboration is key and our I-4 service enables over 60 of the world’s most advanced organisations to work together with us to seek to solve the problem.

THE POLITICS OF BUSINESS

Growth, for obvious reasons, remains high on the UK political agenda and will stay there while the debate over deficit reduction, and the need to spread the benefits of any recovery across society, endures.

At the same time business will continue to be in the spotlight as we approach the General Election. We will continue to engage with the main parties to champion enterprise, competitiveness and private sector wealth creation as well as responsible business and addressing real concerns around the cost of living.

This has the potential to be a divisive debate, but one that business must be part of, because it shows that there is still much to do to restore trust in business.

Trust has been badly shaken, and to put that right will take three things. First a period of calm – with no further corporate scandals; then, a period of consistent economic growth – it is clear people trust business more when they are in work and feeling more prosperous; and finally, and most importantly, genuine efforts by businesses to prove that they are not just here to profit at people’s expense, but have a wider social purpose.

All organisations – large and small – have a role to play in proving, through actions and not just through words, that business is a force for good in society.

It is important, that businesses explain and demonstrate why economic success matters. Businesses are not cut off from the rest of the world; they are an integral part of society, and have enormous power to create shared value.

Our own performance shows why a successful business matters to society. Achieving profitability, in a responsible way, is important because of what it enables us to do, both within the firm and, crucially, in the wider world.

Profitability allows us to create employment – to recruit, train and retain exceptionally talented people. It enables us to invest for the future. And it is from this bedrock of profitability that we make a major financial contribution to society through the taxes that we pay and collect.

It also allows us to invest time, expertise and money into addressing real problems within society.

REGULATION

When businesses lose trust, politicians and regulators feel sincerely that they must act. But there is often a misguided sense that the more layers of regulation they impose, the greater reassurance they will provide to society. Often though it is the values, culture, ethics and transparency that need attention and rules-based regulation does not necessarily change behaviours.

Regulation can make a positive impact but it must be proportionate and effective. For example, the banking crisis – while undoubtedly requiring a robust response from regulators – has nevertheless created a welter of new rules that they could reap a raft of unintended consequences. In all this we must be mindful that we operate in a European single market and wider global business environment. London’s position as a major international financial sector, global business and creative hub, needs to be nurtured carefully if its pre-eminence is to be retained.

Some people argue that accountants make good money from increased regulation. While that may be true, there is no question in my mind that we would be better off financially as a society – and undoubtedly as a firm – if there was more trust and less but higher quality regulation with greater international alignment or equivalence. Trust breeds confidence and growth; excessive or poor regulation rarely does.

BUSINESSES WORKING TOGETHER

One of our principal aims, as a firm, is to bring large and small companies together, because that is how you create wealth and promote innovation and growth. That is precisely the motivation behind our involvement with Tech City in Shoreditch where we were the first of the Big 4 to establish a presence, helping tech start-ups to find their feet and establish trading relationships with bigger business. Absolute symbiosis can and should exist between big and small business if we really want to balance our economy and promote growth.

AUDIT AND ASSURANCE

Audit has of course been in the regulatory spotlight for some time now as policymakers try to ensure that the risks that led to the financial crisis – and which took so many by surprise – do not recur. That debate has become more settled in the UK now following the Competition Commission’s decision to recommend a system of auditor tendering closer to that already implemented by the Financial Reporting Council. Elsewhere in Europe however, the debate remains up in the air.

Audit is the foundation stone of our business. We branch out proudly into other areas but, at its roots, our job is about providing assurance in the widest sense. We are governed by only one standard: our public, professional and deep personal interest in providing assurance of the highest quality. We wake thinking about these things; it is the very heartbeat of what we do. We know that building trust takes years, and that if we lose that trust our brand may be irreparably damaged. We are not prepared to see that happen.

CORPORATE TAX

Tax is in the political spotlight as never before. Here, again, we take a very straightforward line. Our job is to help our clients comply with their tax obligations and plan their affairs in a tax-efficient manner within the law. In providing tax advice and managing our own tax position we are guided by our published principles. Our work often involves helping clients to take advantage of tax concessions put in place by governments to attract investment in an increasingly competitive global tax market – as the UK government has done with successive packages of tax reforms in recent years.

We wholeheartedly support government efforts to crack down on illegal and egregious tax schemes and outright tax evasion. We also fully support their efforts to raise the issue of tax evasion at both the G8 and G20, to promote greater tax transparency and to modernise the outdated and complex global framework for corporate tax.

But the onus here is on policymakers to engage constructively in how we can promote competitiveness, fairness and equity in taxation in an increasingly globalised world. So long as governments continue to offer tax incentives to inward investors, they cannot blame business or their advisors for taking legitimate advantage of those concessions.

RESPONSIBLE BUSINESS

For very many years, going right back to our roots, KPMG has had a well developed and highly-regarded approach to corporate responsibility. In recent years we have been determined to take our agenda much further than what might be termed a “traditional” Corporate Responsibility approach. Our starting point is that the problems now faced by the country (indeed the world) require business, government and civil society organisations to work in a spirit of collaboration to find solutions. We want to be at the forefront of that collaborative effort.

You can see this in our work on social mobility, an issue which has risen to the top of the UK political agenda in the past year and one that we are addressing across our business, through our client and people agendas, through our work with suppliers and through active work in the community.

We have created a really impressive programme to improve the education and social mobility of young people from disadvantaged backgrounds. We now have a continuum of initiatives – from primary school to the world of work – which are beginning to make a real difference in this area. And we are determined to keep building. In the future, for instance, I would like to see our programme extended to the point where we can help young adults in care, (who we have helped with other interventions), finally to find proper employment.

Another issue of huge public concern has been low pay and the living wage. Research we undertook showed a substantial increase in the numbers of people paid less than a living wage. We are proud to be a leader in paying all our staff the living wage, directly employed or contracted. It might not be appropriate for every business, although we encourage our contractors and suppliers to follow suit. We have chosen to take a leading role because of the benefits it brings both commercially and at a macro level too.

LOOKING FORWARD

Times of great change are never easy and I want to thank all my colleagues across the firm for continuing to work with such skill and dedication through an unsettling time.

We share the growing sense of optimism felt by many of our clients, but, like them, our optimism is balanced by realism. The economic outlook is improving, but progress may well continue to be slow.

Despite that, I am confident we are now in a position to use our skills in increasingly dynamic ways to help our clients prosper and grow. That will bring opportunities for us, for them and, importantly, for the wider world.

Simon Collins
Chairman and Senior Partner
KPMG in the UK

Back

TECH CITY

Technology is at the heart of thriving businesses.


And thriving businesses mean investment, employment and a better society all round.


It’s true for every business - regardless of sector, and importantly - regardless of size.


Silicon Valley has long been at the centre stage of technology, but in future, other global hubs will have an important role to play...


...finding solutions, increasing productivity and driving global economic growth.


As the quest for innovation accelerates day by day, the UK needs to ensure it is firmly on that global map and it needs to act now.


At KPMG, we’re helping to drive the UK on to that global stage...


...through our unique High Growth Technology Group,


...a dedicated team with the sole aim of supporting and engaging with early stage and high growth UK tech companies.


Based in Shoreditch, East London, the team assists technology start-ups wherever they’re located in the UK,


...Providing a single point of contact into the wider global KPMG network.


Our aim is to bring together, large and small companies, to create wealth and promote innovation and growth - connecting people with ideas that may, one day, grow into a big business.


And we do this right across the UK.


Since our foundation, we’ve had over 750 meetings with start-ups, investors and multipliers.


We’ve published over 80 pieces of content.


And we’ve held more than 50 events from drop-in knowledge sessions, panel discussions, presentations and mentoring.


And our relationships with our influential partners enhance every aspect of the work we do.


Having a global network of member firms means we can connect people with ideas in an efficient way, helping UK startups deal with questions from tax legislation in Brazil, employing staff in the US, expansion into Germany or customer trends in Spain.


We think by 2018, the world will look very different.


There’ll be a new group of world beating companies, many of which will have started and grown in the UK.  


A mix of successful global brands and renowned niche players.


And the UK is ideally placed to be at the centre stage of all this. A key player for technology development, attracting high levels of funding, talent and interest from around the world.


At KPMG, we want to help build this successful, prosperous UK plc.


So, whether a business is just starting out with an idea, or an SME is looking for specific guidance to grow, we’re thinking about their challenges and helping them all the way.


Back

The future
of banking

CAPTION IN VISION: What will global banks look like in future?


BILL MICHAEL
Global banking, looking forward, is probably going to become much more localised. What we're witnessing here is that countries are coming first, so irrespective of the Chief Executives and what they believe they would look like three, four, five years ago, I'm hearing opinions change. And it's because global regulation, the fact that every country is looking after itself first is changing the shape of what the global universal bank is going to look like. The way I would look at it is that every country needs a bank, okay, and I would liken it to the defence force. Without a bank you will not be able to govern your country, and that is what's fundamentally shaping the size, nature and scale of banks in every single country.


CAPTION: What will change for customers?


BILL MICHAEL
...they're going to have multiple relationships with banks. As banks retreat in to their home country and start focusing on the companies located in that country I think what we'll find is possibly multiple relationships and the very concept of the universal bank, ie using a bank for everything, is probably not going to come to fruition.

So one of the emerging trends may be during this period of reform and rehabilitation is that we will end up perhaps coming up with different forms of financing, the disintermediation of banks, as we would call it, where SMEs perhaps and other corporates are able to raise money directly from people who have access funds, like asset management houses, pension houses, et cetera.


CAPTION: How will KPMG help with change?


BILL MICHAEL
KPMG is passionate about the rehabilitation of the Financial Sector. It's important to have a higher purpose, not just about making money and making profits, but around its social purpose, because banks and financial institutions have got a much broader purpose as we've all subsequently found out. And we are very passionate about making it much more relevant and to 21st Century needs. So we're uniquely positioned, understanding lots of different lenders from countries to customers to different parts of that sector, and our ability to gel the two together to help an institution right now is more powerful than ever.

Back

KPMG as a
responsible
business

Since our foundation, we’ve always recognised that we have an important role to play in society.

At KPMG, we do this by taking a holistic approach to responsible business, always looking to operate to the highest standards of integrity.

We recruit and train the best people to deliver the highest quality client work and contribute to a thriving economy, which drives the financial performance to attract the best talent.

This virtuous circle helps us deliver our skills and capabilities for the benefit of our clients, our colleagues and the issues that matter to society. So, how are we demonstrating our contribution?

A key issue for us is social mobility; it’s a critical business issue as well as a social one.

To help us flourish and grow, we need to find the best talent.

By taking action to help people break through barriers, we’ll unlock their potential, ensuring we recruit the best people, regardless of social background.

That’s why we’ve also taken a leading role to try and improve access to professional services more widely.

We’re working with more than 50 schools across the country to help create pathways to employment.

Our unique School Leaver Programme has recruited 376 students since 2011.

And last year 29% of our school leaver recruits were from target schools in disadvantaged areas. 

We also supported more than 6,100 young people to improve their employability.

Through our work with Action for Literacy and Shelter, we‘re working to improve literacy and access to housing – helping address key barriers to social mobility.

Over the past 12 months we've focused more on how we give our time, reducing unskilled volunteering hours and increasing our pro bono volunteering by 75%, helping build the capacity of organisations to support the issues we want to tackle.

And, we've used our convening power to work with the government and other stakeholders to contribute to policy debate on these issues too.

But we can’t do it alone. We need the support and collaboration of all our stakeholders, to continue to help the UK economy and wider society flourish.

Marianne Fallon, Head of Corporate Affairs, talks about responsible business and KPMG’s role in society.

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Audit Reform

Head of Audit KPMG in the UK - TONY CATES:

Audit’s hugely valuable, and without audit the capital markets would simply not be able to work. Investors need to be able to rely on financial statements to make their investment decisions. If it wasn’t for audit they wouldn’t be able to place that reliance.

But let’s not forget there’s a wider group of stakeholders that see the importance of audit. It’s not just investors, it’s employees, it’s management and it’s society as a whole. Society has lost trust with business, particularly big business, and I think audit has a role to play in helping restore that trust in business, and I think that’s crucially important to our economy and our society. What we’re trying to do is start a debate around what audit assurance, company, reporting, governance could be about in the future.

The starting point is our website and some blogs that we’re starting to stimulate some thoughts, to really be provocative in some areas. I’d like people to really participate, put their comments on the website, challenge us or agree with us if they do agree. But also I want them to be talking to their audit partners, to the lead partner from KPMG and engage with us in a debate, you know, in the field when we’re doing work them a well.

It’s a very personal thing for me. I mean I see the capability of auditors in our firm and in other firms, actually, and I can see what we can do, what assurance we can give, the broader work that we can do outside of the core audit to give assurance to companies and to investors and I’m really passionate about that.

I want us to be adventurous and bold in offering a broader range of services to our clients to give them more comfort in the business models of the companies they invest in, in the sustainability of the companies they invest in and the results of companies they invest in.
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International
Corridors

VOICE OVER

Today, emerging economies are driving global growth, as they continue developing at an unprecedented rate.

VOICE OVER

As China and other High Growth Markets increase their share of global GDP, a major shift in economic power and the geo-political dynamic is underway.

Simon Collins, UK Chairman and Senior Partner:

There’s a huge change in the scale and the extent of the BRICs countries because) what’s happening is you’ve got a very rapidly growing population and as the population is growing it’s also growing in sophistication and purchasing power, so the demographic of consumers is changing enormously. You’ve also got an increasing sophistication in terms of the capital markets and an increasing aspiration to fuel the growth of those economies.

VOICE OVER

So as the global economy continues to evolve, how are trade and investment patterns changing?

Simon Collins, UK Chairman and Senior Partner:

…if you go back to the patterns of trade that used to be – it used to be exporting to high growth countries. It’s now changing very dramatically so we have inward investment into the UK from countries. So examples are Tata Steel purchasing UK steel business or Jaguar Landrover for example. So you’ve got that inward investment. You’ve also got growing export, but an export much more of creativity, of intellectual property, and much less of manufactured goods and you’ve got the two coming together when high growth companies are actually looking to buy intellectual property in the UK in order to leverage that with their own cost advantages and other things in their domestic markets.’

VOICE OVER

Accessing these highly attractive markets and their aspiring consumers presents challenges to UK companies and the risks associated with cross-border investments are varied and often complex.

VOICE OVER

Each market and each business requires a bespoke approach, as there is no ‘one-size-fits-all’ strategy to guarantee success.

VOICE OVER

So how is KPMG helping its clients?

Richard Reid, High Growth Markets Chairman, KPMG:

‘The help that they require in terms of their expansion is firstly what is the market, you know, when they look at a particular market you know, is this a market where they could sell more, understanding the cultures in that country and the rules and regulations in the country because every country has different tax laws, has different employment laws and it’s understanding the entry, how do we get into those countries?’

VOICE OVER

Our High Growth Markets Group, individually focuses on key markets such as China, Brazil, India and Korea, as well as the important emerging regions of Africa, and ASEAN

VOICE OVER

….providing audit, tax and advisory services to UK based companies

VOICE OVER

And, we help clients of all sizes and at all stages in their international strategy, including support of trade missions to key growth markets.

Simon Collins, UK Chairman and Senior Partner:

‘…the UK government is doing an enormous amount to help UK companies take advantage of opportunities in high growth markets. So, whether that’s making sure the UK is a competitive tax environment for inward investment or whether it’s sponsoring trade missions – I went with the Prime Minister on a trade mission to India and many comparable missions like that go on under the auspices of UKTI all the time, so those are examples of how the government is really trying to get behind British Industry.’

VOICE OVER

KPMG also lead on inward investment too, by promoting the UK to our international clients, as an attractive, and highly competitive, investment location for their business.

VOICE OVER

At KPMG, we’re helping our clients to maximise the opportunities presented through investments into and from High Growth Markets.
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Makinson Cowell

Bob Cowell:

Makinson Cowell is a business that helps major listed companies across Europe deal with their institutional shareholders, so that means we help them communicate with those shareholders, we help them decide what to say to them. We help to decide when they should say things, and then we feed back the views of those shareholders in to the boardroom usually once a year.

The importance of what we do for listed companies is that institutional shareholders are very important to them for three reasons, firstly they vote, secondly they are the only source of debt or equity capital going forward and, thirdly, and perhaps most importantly for some executives, they actually determine the share price. So institutional investors matter, and that’s exactly the patch on which we play.

Simon Collins:

I would describe Makinson Cowell as a unique business that provides real, sometimes difficult advice to the boardrooms of big companies and small companies on what their investors think. So it can be very intimate, trusted advice, sometimes in circumstances where it’s not popular, but it’s always independent and it’s always high integrity advice.

The decision to acquire Makinson Cowell came about partly by chance, as these things often do, but actually it’s the fulfillment of a dream that we’ve had for a long time to round out the advice we give our clients about their balance sheet, so complementing our existing debt advisory capability with the Makinson Cowell proposition of giving independent advice on equity, on what institutional investors think. Together we give advise on the whole balance sheet and that’s a very powerful combination.

The reaction from our clients has been incredibly gratifying. So I’ve spoken to a lot of our FTSE-100 clients, in particular, CEOs, Chairmen, and they’ve said a number of things. First of all they’ve said well done for actually acquiring the business. Secondly, you know, please don’t change too much about what they do, but also a fantastic assessment of how well the fit we work, how the cultures all work together, and actually CEOs and Chairs and finance directors of our clients saying we will do more with you as a result of this.

Bob Cowell:

It’s exciting for us that since the deal’s been announced, new opportunities are already beginning to emerge. For example, we pitched last week to a major company in Australia, we wouldn’t have done that on our own. We go jointly in to a FTSE-100 company boardroom to talk about debt and equity, which we think is unique. In fact, the chairman of one major bank said that he was far more likely to use us going forward as part of KPMG than he would us being an independent boutique.

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