Reduced demand for consulting and transaction services is cutting into profit, and the resulting drop in global revenue, is prompting some Big Four accounting firms to lay off partners, The Wall Street Journal reported.

Partner layoffs are rare in the profession. Firms generally have to buy out the partner’s equity and make an additional payment based on the person’s seniority and tenure when they leave, Tom Rodenhauser, managing partner at Kennedy Research Reports, which tracks the consulting industry, told the Journal.

The Big Four—EY, KPMG, Deloitte and PwC—had a combined 15,700 U.S. partners in 2022, including 3,600 at EY and 2,344 at KPMG, according to market research firm Statista.  They depend on their consulting businesses for 43 percent to 66 percent of their global revenue depending on the firm, a situation that evolved over the last two decades.

Many consulting operations ballooned in staff during the pandemic, convinced that companies would continue to lean on consultants as they adapted their business models to a new normal, said Allan Koltin, chief executive at advisory firm Koltin Consulting Group, in an interview with the Journal.

“In 2023 especially, the number of deals being done everywhere declined, and that led to a material impact for many consulting firms,” he said. “That includes transaction advisory work, due diligence assignments and quality of earnings reports.”

EY, KPMG and Deloitte have collectively laid off thousands of U.S. workers this year. PwC hasn’t had any U.S. layoffs and isn’t planning any, a U.S. spokesman told the Journal.

EY experienced a sharp drop in deal volume and sluggish private-equity transactions, hurting what was a profitable and reliable business for the firm, executives have said in other webcasts earlier this year. The firm has been laying off dozens of U.S. partners, the Journal previously reported. The Journal noted that EY didn’t respond to a request for comment.

Last summer, KPMG cut its workforce by roughly 5 percent, and those cuts included partners. The Journal reported that KPMG declined to comment on questions related to U.S. partner layoffs. The firm has made discrete adjustments on staff levels within business lines, a U.S. spokesman said. 

Deloitte cut 1.5 percent of its U.S. staff in April, the Journal reported. A spokesperson told the Journal that this was a continuing process: “Based on moderating growth and very low levels of voluntary attrition, we are taking modest personnel actions where necessary.”

U.S. worker exits at the Big Four firms—both voluntary and not—are up by 43 percent through October from the year-earlier period, to about 65,800, according to a Journal review of online professional profiles by Revelio Labs, a provider of workplace data. Globally, there were about 307,000 Big Four exits this year through October, up by 15.4 percent from the prior-year period, Revelio said.

“Consultants ... thought the good times [were] going to continue to be relatively good into the foreseeable future," Rodenhauser said.  "Now it’s clear that’s not true, which is why the cutbacks have occurred.”  

KPMG, which reported its revenue this week, was hit hardest in global advisory among the Big Four, with revenue rising by 2.98 percent to $15.9 billion for the year ended Sept. 30, compared with a 13.1 percent increase during the prior-year period. This marks the smallest growth since a 2.3 percent decline in the 2020 period, at the height of the pandemic, according to the Journal.