EY cuts 3,000 jobs in U.S. after failed global split

Ernst & Young plans to lay off 3,000 employees, or close to 5% of its workforce in the U.S., to reduce "overcapacity," mostly on the consulting side of the firm, only days after calling off plans to spin off that practice as a publicly traded company.

The Big Four firm informed its staff about the job cuts Monday, making it the latest major firm to reduce staffing as fewer corporate clients need consulting help on issues like mergers and acquisitions or going public during a slow IPO period. In February, KPMG announced it was cutting 700 jobs in its advisory business, or nearly 2% of its total staff. 

"After assessing the impact of current economic conditions, strong employee retention rates and overcapacity in parts of our firm, we have made the difficult business decision to separate approximately 3,000 U.S .employees, representing less than 5% of our U.S. workforce," EY US said in a statement emailed from a spokesperson. "We have approached this decision, with the utmost care, respect and consideration, and EY will offer comprehensive support to those who are affected. To be clear, these actions are part of the ongoing management of our business and not a result of the recently concluded strategic review, known as Project Everest. We remain focused on our people, delivering innovative and forward-thinking approaches to our clients, and an industry-leading commitment to quality."

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EY nixed Project Everest last week after partners at the U.S. member firm balked at plans to move most of the lucrative tax practice over to the consulting side, as well as disagreements over compensation, revenue and fees. Last week, the U.S. and U.K. firms announced cost-cutting plans after Project Everest was canceled, with the U.S. firm planning on $500 million in cost savings over the next 12 months. The costs of the failed project were estimated at $600 million worldwide. 

Another major consulting firm, Accenture, which started out decades ago as the consulting side of Arthur Andersen, has also announced plans to cut 2.6% of its global workforce in the next year and a half, according to the Financial Times, which first reported the EY layoffs, and the management consulting firm McKinsey is cutting about 3% of its workforce.