This is an audio transcript of the FT News Briefing podcast episode: ‘A final goodbye to EY’s Project Everest?’
Marc Filippino
Good morning from the Financial Times. Today is Friday, June 28th and this is your FT News Briefing. The US is trying to bring Israel and Arab states together, and migration will be a huge issue in the UK election next week. Plus, EY might just put the final nail in the coffin for one of its most controversial plans but . . .
Stephen Foley
Many of the issues that led them to come to the conclusion that Project Everest was a good idea in the first place, those issues haven’t gone away.
Marc Filippino
I’m Marc Filippino and here’s the news you need to start your day.
[MUSIC PLAYING]
The US is inviting foreign ministers from Israel and several Arab states to the Nato summit in Washington next month. The countries include Egypt, Jordan and Qatar. It’ll put disagreements over the Israel-Hamas war front and centre. Now, the invitation is a bit of a double-edged sword for the US. The Nato summit is an opportunity for it to show that it can help countries co-operate, but it’s also a bit of a tricky situation. Nato member states are pretty divided over how to approach the conflict.
[MUSIC PLAYING]
EY is officially giving up on splitting in two for now. The company’s new global CEO, Janet Truncale, said as much in a memo on Thursday. Stephen Foley covers EY for the FT. Hi, Stephen.
Stephen Foley
Hi, Marc.
Marc Filippino
All right, so let’s step back for a second. Stephen, just remind us what this split was supposed to be and I remember it having a cool name, right, like Project Everest.
Stephen Foley
You’re absolutely right. Project Everest. Yes. It was designed to spin off EY’s giant consulting and tax advisory business as a publicly listed company. The idea being that that would free that company up from all those conflict of interest rules that block it from working with the clients of the other half of EY, which is the audit business. In so doing, it would be free to go after tech partnerships and a whole set of multinational corporations that it’s currently blocked from accessing.
Marc Filippino
And EY said that it was pulling the plug on Project Everest a little over a year ago now. Why was that?
Stephen Foley
They couldn’t work out where to split the business. They couldn’t get the math to work, and they couldn’t get the US firm in particular to agree that it was a good idea beyond theoretically.
Marc Filippino
So then, Steven, on Thursday, this memo came out. What exactly did it say?
Stephen Foley
Yeah. Janet Truncale, who is taking over as global CEO on the 1st of July. She put out her first memo to staff on Thursday, introducing herself, introducing her new strategy, which she’s calling all in. This is a strategy that notably does not include any plan to split the business. In fact, quite aside from that, she also talks about the benefits of the scale and the connectivity of the business. So she says that they are going to recommit to working together as one organisation.
Marc Filippino
Stephen, was there any possibility that before Truncale sent this memo out that the project would actually get revived?
Stephen Foley
Well, there’s a lot of people that think that strategic rationale behind it continues to hold true. And given that logic, there’s also a lot of people who think it should be revised as soon as possible, at least in some form. One of the things that Everest was going to do is going to create cash windfalls for people on the audit side of the business, because they were selling off this lucrative consulting arm. And on the consulting side, employees and partners would get shares in this new entity with potentially significant upside. So there were financial reasons, personal financial reasons to be in favour as well.
Marc Filippino
Yeah, but Truncale’s memo put cold water on all that. So do you have a sense of what EY is going to do to boost business instead?
Stephen Foley
No. There are some really intractable problems that working together as a single firm actually means. The rationale behind Everest is not something that’s been repudiated, even by Janet Truncale herself. On a call with partners, she was saying that many of the issues that led them to come to the conclusion that Project Everest was a good idea in the first place, those issues haven’t gone away. She just says that for now, it’s not possible.
Marc Filippino
Stephen Foley is the FT’s US accounting editor. Thanks, Stephen.
Stephen Foley
Thank you very much.
Marc Filippino
Thames Water didn’t mince words in a new report. It says its ageing assets are a “risk to public safety, water supply and the environment”. There’s a bunch of stuff going on at Britain’s biggest water utility. You’ve got out of date monitoring technology, a shortage of reservoirs and crumbling sewage pipes. Maybe the worst part is a parasite that’s living in drinking water because of outdated processing plans. Thames Water desperately needs money to keep operating and to make these much-needed upgrades, so it wants to jack up bills by nearly 60 per cent. The company’s regulator is expected to make a decision on that plan come July 11th.
[MUSIC PLAYING]
Prime Minister Rishi Sunak and Labour leader Keir Starmer faced off in their final debate this week. We’re just six days away from the election now. Labour is still expected to win in a landslide. That hasn’t changed much since the election was announced. So we wanted to focus on something else that Sunak kept bringing the conversation back to, and that’s migration. Here to talk about how the two parties are approaching the issue is the FT’s Whitehall editor, Lucy Fisher. Hi, Lucy.
Lucy Fisher
Hi, Marc.
Marc Filippino
All right, so before we get into the debate, can you just give us a state of play on what’s going on with migration in the UK right now?
Lucy Fisher
Well, the first thing to say is that this is a hot political topic and has been for some time. It is the third most important issue after the economy and health to UK voters overall. And at the last general election in 2019, the Tories promised to reduce migration. So what’s happened since then? Well, in fact, it has gone up. The huge, significant part of this comes from legal migration. And then the other portion that also is a very emotive topic in the UK is illegal migration. People who cross the channel by small boats. And last year we saw almost 30,000 people come to the UK by that route. So people in the UK are quite hit up about both kinds of migration, legal and illegal. And both the two main parties, Labour and the Conservatives, are pledging to try and bring down both if they win the election next week.
Marc Filippino
Let’s break down each one. Sunak obviously has been able to articulate what his main selling points on immigration are. What is he saying about it going into the election?
Lucy Fisher
Well, his big promise is to get this Rwanda deportation scheme off the ground. This idea that if people cross the channel and come to the UK illegally, they will not be allowed to remain in the UK, they will be removed to the east African nation, they will be processed there and they will be forced to stay there. Obviously there’s a lot of scepticism around that. Conservatives have been promising to get this off the ground for some time. They’ve run into lots of legal problems. They’ve had to change the law, they’ve had to sign a new treaty with Rwanda to ensure it’s a safe country to which to send asylum seekers. And so following all that, there’s scepticism about whether the conservatives would be able to make it workable and then to deal with legal migration, they are promising to cap both work and family visas, and to bring down that cap yearly over each of the next five years or of the next parliament.
Marc Filippino
OK, so that’s what Sunak has been saying. What is Labour promising if they win next week?
Lucy Fisher
Well, regarding illegal migration, Keir Starmers big slogan is smash the gangs. You know, really try and tackle the human traffickers who help people get to the UK and to cross the channel. And he thinks that Labour’s plans to try and reset relations with the EU would very much help do that. He’s also talking about trying to forge new returns agreements with other nations in order to be able to send back some of the people who come to the UK seeking asylum. They have been kind of question marks about how feasible that is. You know, many people that come to the UK come from countries like Afghanistan, Iran, not places under international law. It would be seen as safe to return them. And then when it comes to legal migration, Labour’s big emphasis has been on trying to boost the skills of the UK workforce to try and reduce the incentive for companies to look overseas in order to staff up their firms.
Marc Filippino
And Lucy, do we know which plan is going to appeal to more voters?
Lucy Fisher
Well, in a sense, part of it comes down to trust on this issue. Many voters think that the Conservatives have repeatedly promised to reduce migration and just haven’t managed to do it. So there’s scepticism there about their commitment to this cause. And that’s one reason I think we’re expecting a lot of right-wing votes to leech away from the Tory party to Reform UK, the party led by Nigel Farage. And on top of that, you know, Labour previously, in iterations before Starmer came to the helm, was very much considered an internationalist open borders party. So I think some people are sort of sceptical about what is actually workable to try and bring those numbers down.
Marc Filippino
Lucy Fisher is the FT’s Whitehall editor. Thanks, Lucy.
Lucy Fisher
Thanks, Marc.
Marc Filippino
You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back next week for the latest business news. The FT News Briefing is produced by Kasia Broussalian, Fiona Simon, Sonja Hutson and me Marc Filippino. Our engineer is Monica Lopez. Our intern is Prakriti Panwar. We had help this week from Mischa Frankl-Duval, Denise Guerra, Sam Giovinco, Breen Turner, David da Silva, Michael Lello, Peter Barber and Gavin Kallmann. Our executive producer is Topher Forhecz. Cheryl Brumley is the FT’s global head of Audio. And our theme song is by Metaphor Music.