For the 12 months ending 30 June 2020, PwC firms around the world had gross revenues of US$43 billion – up 3% in local currency and 1.4% in US dollars.
During the first nine months of FY20 to the end of March, revenues grew by nearly 7% over the same period last year with increases across all lines of business and in every major market. From April to June, revenues were significantly impacted by the lockdown and subsequent slowing economies as countries around the world fought the COVID-19 pandemic. Compared to the same three months in 2019, revenues were down from April to June 2020 by 6%.
“First and foremost the COVID-19 pandemic has been a human tragedy that has deeply affected the lives of many people around the world including members of our PwC family, their relatives and friends and our heartfelt condolences go out to all those who have lost loved ones,” said Bob Moritz, Chairman of the PwC Network.
“Since the pandemic struck, our priorities have been the safety and wellbeing of our people, protecting and preserving jobs, and helping our clients and the communities in which we live and work deal with the impact of COVID-19. I am proud of what we have done over the last year and the way our people have adapted quickly to a huge amount of change while at the same time continuing to connect, collaborate and innovate for the benefit of our stakeholders across the world.”
“While the last few months have been very challenging for everyone, we have re-focused our business to help our clients manage the immediate impacts of the pandemic and reinvent their businesses for future success. It has never been more important to provide our stakeholders with high quality services. We have also continued our significant investments in technology and upskilling our people to help build a sustainable PwC for the future. Our investment in technology was borne out at the height of the lockdown when 95% of our 284,000 strong workforce were operating out of the office with no interruption to the service we were able to provide”, added Bob Moritz.
Revenues across the world
In the Americas, revenues rose by 3% with a particularly good performance from businesses in the United States and Canada. Revenues in Western Europe were up by 2%, while in Central and Eastern Europe, revenues grew by 4%.
Revenues from the Middle East and Africa rose by 10% with a strong result from the Middle East where revenues were up 14%. Across Asia, revenues grew by 5% while in Australasia and the Pacific, revenues were down 1% reflecting difficult trading conditions throughout FY20.
Regional growth numbers for the full year FY20 mask the impact of COVID-19, with all regions performing as anticipated up to the end of March 2020 and then feeling the full impact of the economic restrictions caused by lockdowns in the months of April, May and June. For the last three months of FY20, in most markets around the world we experienced declines in revenues compared with the same period in FY19 with falls in revenues of up to 30% in certain countries.
Revenues by line of business
Around the world, our businesses are focused on providing high quality services that help our clients respond to an ever more complex and challenging environment and address current and future opportunities. While all our lines of business continued to grow in FY20, each was impacted by the economic effects of COVID-19 and we expect market conditions to be challenging for all our operations as we go into our new financial year.
Assurance: Assurance remains PwC’s largest operation across the world and our brand defining business, serving key stakeholders and helping to build trust in the world’s capital markets. In FY20, revenues from our assurance operations grew by 3% to US$17.6 billion, driven by continued strong demand for our core audit. As management and other stakeholders seek insight into operations, risks and performance, and to increase confidence and resilience in business, we have seen continued strong growth in our broader assurance services, such as internal audit and governance, risk and controls. Demand for our digital risk solutions has also remained strong as companies look for support as they accelerate their transition to the Cloud. With almost 119,000 professionals, PwC is the world’s largest provider of assurance services.
Advisory: PwC Advisory operations grew by 4% to US$14.7 billion. This growth was driven by high demand across the world for advice on strategy, business transformation and value creation in the first nine months of the financial year. Our advisory business differentiates by bringing together consulting, deals and cybersecurity professionals, and our operations benefited from increased teaming with our tax and risk assurance colleagues to provide a more integrated service for our clients that gives the advice and support they need from strategy right through to execution. PwC Advisory now employs over 71,000 people.
Tax & Legal Services: PwC Tax & Legal revenues grew by 2% to US$10.7 billion, with demand for tax reporting and strategy, people and organisation and legal services in the first nine months of the year offset by the impact of the pandemic in the final three months. Guided by our PwC Global Tax Code of Conduct, the over 55,000 professionals in our Tax & Legal Services teams use their knowledge and expertise to help clients – ranging from individuals to the largest global corporations – to navigate complex and challenging environments, address people and legal issues, and comply with their tax and reporting responsibilities.
The year ahead
“While we adapted quickly to many of the new challenges that the COVID-19 pandemic brought, there is no doubt that the next 12 months and beyond are going to be difficult. Our economists are predicting that the global economy will contract by 5.5 % by the end of 2021 and while different countries will recover at different rates it is clear that the economic downturn will impact us and our clients across the world,” said Bob Moritz.
We are now very clearly focused on a number of priorities.
- Jobs: Doing the right things to preserve jobs for our people, continue to invest in building the workforce PwC needs for the future, while maintaining the sustainability of our operations. Unfortunately we have seen some job losses in a few markets around the world, particularly in the advisory business, but we are working hard to limit these by containing non-essential costs and investments.
- Safety and Wellbeing: Where we are returning to office based work, ensuring that our people are safe and comfortable and that we have processes and technologies in place to protect our people in line with relevant safety protocols. And where our people remain working from home, we continue to provide the support that they need to meet the challenges this can bring.
- Quality: The uncertainty created by the pandemic and its economic impact has placed an even greater focus on the importance of trust in institutions, information and increased transparency. Investing in the enhancement of the quality of all of the services we provide to our stakeholders remains our number one priority, including continuing to invest the US$1 billion we announced last year to drive quality and innovation by making us the most cloud-enabled organisation in the world.
- Clients: Supporting our clients across the world as they deal with the impact of the pandemic and look to restart operations, repair their balance sheets and rethink their business models.
- Innovation: Driving and scaling up innovation right across our network and the development of new products and services. As our stakeholders grapple with the challenges of the current economic environment, it is vital that we are able to advise and support them on the best ways to construct sustainable businesses for the future.
- Upskilling: Upskilling our own people and collaborating with UNICEF in support of Generation Unlimited to help upskill young people across the world has become even more important as the pandemic has accelerated the use of technology and remote working. Despite the economic uncertainty, we continue to invest heavily to help our own people and others better prepare for the new world of work.
- Diversity and Inclusion: Redoubling our efforts to create a PwC culture where everyone feels valued, listened to and has the opportunity to grow and succeed and taking a leading role in the global dialogue on diversity. We have created our first global diversity and inclusion leadership council.
“The pandemic brought many challenges but it also brought the opportunity to reflect and to some degree rethink the future. How we work together, how we use technology, what real estate we need, whether we need to travel so much, how to innovate, how to connect with our stakeholders and how to prioritise our health and wellbeing. These are all issues that we are actively working on as we think about the PwC of tomorrow,” said Bob Moritz.
The PwC Global Annual Review will be published in October 2020 and will cover in more detail how PwC responded to the COVID-19 pandemic, the work that we do with our clients, stakeholders and the communities where we operate, how we supported our people, the results of our quality inspections and how we are embedding a high-quality culture across PwC, and the actions we are taking relating to important issues such as diversity and inclusion.
‘Industry 4.0’ tech for post-COVID world, is driving inequality
Developing countries must embrace ground-breaking technologies that have been a critical tool in tackling the COVID-19 pandemic, or else face even greater inequalities than before, UN economic development experts at UNCTAD said on Thursday.
“Very few countries create the technologies that drive this revolution – most of them are created in China and the US – but all countries will be affected by it”, said UNCTAD’s Shamika Sirimanne, head of Division on Technology and Logistics. “Almost none of the developing countries we studied is prepared for the consequences.”
The appeal, which is highlighted in a new UNCTAD report, relates to all things digital and connective, so-called “Industry 4.0” or “frontier technologies”, that include artificial intelligence, big data, blockchain, 5G, 3D printing, robotics, drones, nanotechnology and solar energy.
Gene editing, another fast-evolving sector, has demonstrated its worth in the last year, with the accelerated development of new coronavirus vaccines.
In developing countries, digital tools can be used to monitor ground water contamination, deliver medical supplies to remote communities via drones, or track diseases using big data, said UNCTAD’s Sirimanne.
But “most of these examples remain at pilot level, without ever being scaled-up to reach those most in need: the poor. To be successful, technology deployment must fulfil the five As: availability, affordability, awareness, accessibility, and the ability for effective use.”
Income gap widening
With an estimated market value of $350 billion today, the array of emerging digital solutions for life after COVID is likely to be worth over $3 trillion by 2025 – hence the need for developing countries to invest in training and infrastructure to be part of it, Sirimanne maintained.
“Most Industry 4.0 technologies that are being deployed in developed countries save labour in routine tasks affecting mid-level skill jobs. They reward digital skills and capital”, she said, pointing to the significant increase in the market value of the world’s leading digital platforms during the pandemic.
“The largest gains have been made by Amazon, Apple and Tencent,” Sirimanne continued. “This is not surprising given that a very small number of very large firms provided most of the digital solutions that we have used to cope with various lockdowns and travel restrictions.”
Expressing optimism about the potential for developing countries to be carried along with the new wave of digitalisation rather than be swamped by it, the UNCTAD economist downplayed concerns that increasing workforce automation risked putting people in poorer countries out of a job.
This is because “not all tasks in a job are automated, and, most importantly, that new products, tasks, professions, and economic activities are created throughout the economy”, Sirimanne said.
“The low wages …for skills in developing countries plus the demographic trends will not create economic incentives to replace labour in manufacturing – not yet.”
According to UNCTAD, over the past two decades, the expansion in high and low-wage jobs – a phenomenon known as “job polarization” – has led to only a single-digit reduction in medium-skilled jobs in developed and developing countries (of four and six per cent respectively).
“So, it is expected that low and lower-middle income developing countries will be less exposed to potential negative effects of AI and robots on job polarization”, Sirimanne explained.
Nonetheless, the UN trade and development body cautioned that there appeared to be little sign of galloping inequality slowing down in the new digital age, pointing to data indicating that the income gap between developed and developing countries is $40,749 in real terms today, up from $17,000 in 1970.
Greater Innovation Critical to Driving Sustained Economic Recovery in East Asia
Innovation is critical to productivity growth and economic progress in developing East Asia in a rapidly changing world, according to a new World Bank report launched today.
Countries in developing East Asia have an impressive record of sustained growth and poverty reduction. But slowing productivity growth, uncertainties in global trade, and technological advances are increasing the need to transition to new and better modes of production to sustain economic performance.
To support policy makers in meeting this challenge, The Innovation Imperative for Developing East Asia examines the state of innovation in the region, analyzes the key constraints firms face in innovating, and lays out an agenda for action to spur innovation-led growth.
“A large body of evidence links innovation to higher productivity,” said Victoria Kwakwa, World Bank Vice President for East Asia and Pacific. “The COVID-19 pandemic, climate change, along with the fast-evolving global environment, have raised urgency for governments in the region to promote greater innovation through better policies.”
While developing East Asia is home to several high-profile innovators, data presented in the report show that most countries in the region (except China) innovate less than would be expected given their per capita income levels. Most firms operate far from the technological frontier. And the region is falling behind the advanced economies in the breadth and intensity of new technology use.
“Aside from some noteworthy examples, the vast majority of firms in developing East Asia are currently not innovating,” said Xavier Cirera, a lead author of the report. “A broad-based model of innovation is thus needed – that supports a large mass of firms in adopting new technologies, while also enabling more-sophisticated firms to undertake projects at the cutting edge.”
The report identifies several factors that impede innovation in the region, including inadequate information on new technologies, uncertainty about returns to innovation projects, weak firm capabilities, insufficient staff skills, and limited financing options. Moreover, countries’ innovation policies and institutions are often not aligned with firms’ capabilities and needs.
To spur innovation, the report argues that countries need to reorient policy to promote diffusion of existing technologies, not just invention; support innovation in the services sectors, not just manufacturing; and strengthen firms’ innovation capabilities. Taking this broader view of innovation policy will be critical to enabling productivity gains among a broader swath of firms in the region.
“It is important for governments in the region to support innovation in services, given their rising importance in these economies – not only for better service quality but increasingly as key inputs for manufacturing,” said Andrew Mason, also a lead author of the report.
Countries also need to strengthen key complementary factors for innovation, including workers’ skills and instruments to finance innovation projects. Building stronger links between national research institutions and firms will also be critical to fostering innovation-led growth in the region.
Sea transport is primary route for counterfeiters
More than half of the total value of counterfeit goods seized around the world are shipped by sea, according to a new OECD-EUIPO report.
Misuse of Containerized Maritime Shipping In the Global Trade of Counterfeits says that seaborne transport accounts for more than 80% of the volume of merchandise traded between countries, and more than 70% of the total value of trade.
Containerships carried 56% of the total value of seized counterfeits in 2016. The People’s Republic of China was the largest provenance economy for container shipments, making up 79% of the total value of maritime containers containing fakes and seized worldwide. India, Malaysia, Mexico, Singapore, Thailand, Turkey and the United Arab Emirates are also among the top provenance economies for counterfeit and pirated goods traded worldwide.
Between 2014 and 2016, 82% of the seized value of counterfeit perfumes and cosmetics by customs authorities worldwide, 81% of the value of fake footwear and 73% of the value of customs seizures of fake foodstuff and toys and games concerned sea shipments. Additional analysis showed that over half of containers transported in 2016 by ships from economies known to be major sources of counterfeits entered the European Union through Germany, the Netherlands and the United Kingdom. There are also some EU countries, such as Bulgaria, Croatia, Greece and Romania, with relatively low volumes of containers trade in general, but with a high level of imports from counterfeiting-intense economies.
To combat illicit trade, a number of risk-assessment and targeting methods have been adapted for containerised shipping, in particular to enforce against illicit trade in narcotics and hazardous and prohibited goods. But the analysis reveals that the illicit trade in counterfeits has not been a high priority for enforcement, as shipments of counterfeits are commonly perceived as “commercial trade infractions” rather than criminal activity. Consequently, existing enforcement efforts may not be adequately tailored to respond to this risk, according to the report. Tailored and flexible governance solutions are required to strengthen risk-assessment and targeting methods against counterfeits.
As well as infringing trademarks and copyright, counterfeit and pirated goods entail health and safety risks, product malfunctions and loss of income for companies and governments. Earlier OECD-EUIPO work has shown that imports of counterfeit and pirated goods amounted to up to USD 509 billion in 2016, or around 3.3% of global trade.
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