The Public Investment Fund of Saudi Arabia has prohibited PwC from advisory services for one year, stating no reasons. This decision follows PwC’s establishment of a regional headquarters and significant workforce in Saudi Arabia. Despite this, PW’s revenue in the Middle East increased 26% year-on-year, indicating strong growth prospects within the region.
The Public Investment Fund (PIF) of Saudi Arabia has suspended PwC from providing advisory services for a one-year period. The fund did not clarify its reasons in the communications sent to its portfolio companies. Representatives for the PIF have chosen not to comment on the matter, nor did a spokesperson for PwC respond to inquiries regarding this decision.
This action by the PIF comes two years post PwC’s authorization to establish its regional headquarters in Saudi Arabia, where it employs over 2,000 personnel across cities like Riyadh, Jeddah, and Dhahran. In the Middle East, PwC has a presence in more than 20 locations, indicating its significant operational footprint in the region.
PwC offers various non-audit services, which include advisory for mergers and acquisitions, tax consultation, and strategic consulting. Notably, the Middle Eastern market was the fastest growing for PwC in the UK last fiscal year, reflecting the firm’s increasing influence in the region despite the current suspension.
For the twelve-month period ending June 30, the Middle East generated approximately £1.97 billion ($2.5 billion) in revenue for PwC, marking a 26% year-on-year increase. The firm remains optimistic about sustained revenue growth in the region through 2025 and 2026, although it anticipates potential challenges in meeting the previous year’s performance.
The Middle East is a robust market for consulting firms, with significant profitability observed by major players such as McKinsey & Co. and Boston Consulting Group Inc. Business generated from the Saudi wealth fund has considerably contributed to this growth, highlighting the fund’s influence on the consulting industry.
The PIF is pivotal to Saudi Arabia’s Vision 2030 economic transformation initiative, overseeing the establishment of nearly 100 portfolio companies, including the $1.5 trillion Neom city project. Such investments are crucial, particularly as the sector faces ongoing economic challenges and decreasing demand for consulting services in other major markets like Australia and China.
The PIF’s year-long ban on PwC from advisory services signifies a pivotal moment for both entities, potentially affecting PwC’s operations in a rapidly growing market. Despite this setback, PwC continues to be optimistic about its revenue potential in the Middle East, which has proven resilient and profitable. The situation underscores the dynamic and sometimes volatile relationship between major consulting firms and sovereign wealth funds, particularly in the context of Saudi Arabia’s ambitious economic goals.
Original Source: m.economictimes.com
