A second wave of job losses from the professions could add to Australia’s staggering economic toll from the coronavirus pandemic, as law firms, accountancy practices and consultants prepare plans to survive the downturn.
While accountants, business advisers and lawyers have initially been busy helping clients with layoffs, shutdowns and emergency capital raising, the economic contraction is expected to hit these sectors hard in coming weeks.
And the finance sector is next in line as plunging markets trash investment portfolios and slash the demand for financial advice.
The severity of the layoffs could be softened by the government’s newly announced scheme to pay employers $1,500 a fortnight for each employee that stays employed.
Most of the larger firms will need to show they have a 30% or 50% fall off in turnover, depending on size of turnover before the crisis.
There are an estimated 193,000 accountants in Australia, with the big four accounting and consulting firms accounting for more than 33,000 of those jobs.
A 2014 census by the NSW Law Society put the number of solicitors at 66,211, with 41% of those in NSW, and 24.5% in Victoria.
The big professional organisations such as Deloitte, PwC, KPMG and EY are already moving to scale back their operations and cut partner draws as clients retreat.
The big four and many law firms were already well set up for remote working as consultants often work off-site or at their clients’ offices so moved quickly to adapt their work practices. But now they are focusing on saving their own businesses.
Partners’ remuneration is being reduced, reportedly by between 15% to 50%, graduate programs have been suspended, discretionary spending slashed and most are reviewing staff numbers.
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Staff are also expect to be asked to take leave or work a four-day week as clients cut spending, especially on areas now seen to be optional.
Deloitte, which has 11,000 staff in Australia, will shut down for a week in April, forcing the entire firm to take one week of annual leave, and has issued an urgent request for audit and assurance partners to quickly bill their clients.
EY Australia, which employs more than 5,000 staff, told Guardian Australia it had had a crisis management team focused on Covid-19 since January.
“We have enlisted the help of resilience experts to advise the leadership team, alongside medical and health experts, to support our people in the best possible way through these turbulent times,” a spokesman said.
“We have explained to our people that we don’t have a crystal ball and there is significant uncertainty, and that explains our cuts to discretionary spending, the freeze on recruitment and reduced partner draws.”
“We have also been clear that to protect jobs we will redeploy our people to higher demand areas and provide options for people to modify their work arrangements or scale back hours,” the firm said.
“All of these measures are designed to avoid arriving at a place where we need to effect redundancies. However, where there is significant and prolonged downturn in demand, and redeployment is not possible, redundancy will be reluctantly applied as a last resort.”
At mid-tier firm Grant Thornton, partners will take pay cuts of between 20% and 50%, while 95% of staff have agreed to cut their hours and pay from 1 April. The aim is to avoid or reduce the number of staff cuts required, CEO Greg Keith told the Australian Financial Review.
In the short term some niche areas in professional services have seen a surge in activity, notably helping firms prepare for insolvency and emergency capital raising.
But dealmaking, new capital raisings and spending on consultancies will stall as companies go into survival mode.
Companies are expected to slash work on areas such as climate change modelling and gender diversity, while governments are halting consulting work on policy areas.
“There’s a lot of that fluffy consulting – people will say, uh, I don’t need it,” one big-four partner said.
Fallout from the economic shutdown imposed by the government to curb the spread of Covid-19 spread to the finance sector on Monday.
Bank of Queensland became the first bank to withdraw its profit guidance because of the coronavirus while insurance and advice companies said they had taken a heavy hit because the sharemarket has lost about a third of its value over the past month.
Challenger, which offers life insurance and annuity products, said it had dumped shares, reducing them from 13% of the assets backing its life products to just 5%. Investors who have pumped $345m into high-interest notes issued by Challenger also got a nasty shock – the company won’t be repurchasing them, as it usually does, and they will instead be converted into ordinary shares.
Insurer QBE withdrew its profit forecasts. IAG said it was maintaining its profit forecasts but flagged a $100m loss in its investment portfolio since the end of the year, most of which took place in March.
In the legal profession, the social distancing rules are adding to the stresses of economic downturn, forcing courts to restrict hearings to the most urgent.
Meanwhile, the courts are trying to keep operating, prioritising hearings for those in custody.
The New South Wales supreme court is continuing to operate but with no personal appearances in any matters, save in exceptional circumstances with the leave of the chief justice or head of jurisdiction.
Supreme court bail callovers are now remote via telephone dial-in or video (over the internet). The accused appears via a videolink, as has been the case for some time.
From 1 April 2020, the district court of NSW will temporarily suspend all new judge-alone trials, sentence hearings, local court appeals, arraignments and readiness hearings, where the defendant is not in custody.
“This temporary suspension will be reviewed on 1 May 2020. The court will continue to hear to the extent and for as long as possible consistent with health advice, all criminal matters where the defendant is in custody, with the exception of new jury trials which remain temporarily suspended,” chief judge Price said.
In the local court, measures are in place to limit attendance in the courts, with represented people no longer required to attend, limiting attendance to lawyers. Non-represented people are being encouraged to deal with the court via email, including entering pleas.
Defended hearings are being pushed back for mention to the week of 4 May.
Other states are taking similar steps to limit face to face appearances where possible, while still ensuring that people who are in custody are dealt with as swiftly as possible.