Ernst and Young creating 140 Scots jobs to advise on cost-cutting

Stephen Farrell, previously managing director of Mouchel's international consulting business, has been recruited to head up the operation, which will also target the Scottish Government and quangos as they come under pressure to reduce costs.

The 140 jobs will be split across E&Y's offices in Edinburgh, Glasgow and Aberdeen.

The plans for Scotland come after E&Y's London office resurrected a consultancy business three years ago which now generates around 350 million a year in fees. In 2000, E&Y sold its previous consulting business to Capgemini of France for €375m (325m) but has since returned to providing similar services.

Hywel Ball, E&Y's managing partner in Scotland, said demand for advice on issues such as cost cutting has increased since the recession as firms are under pressure to run far more efficiently.

He said E&Y was having to fly consultancy partners up from London to service clients north of the Border, particularly among financial services firms. It therefore made sense to set up a separate Scottish advisory unit. The first indication of E&Y's plans emerged in The Scotsman's sister paper, Scotland on Sunday, which said the addition of the advisory business will help E&Y grow its business north of the Border by 20 per cent over the next three years.

Ball said: "Cost reduction still provides a major opportunity at the moment - looking at procurement and re-engineering businesses. We still see a huge appetite for that type of service in the private sector."

Ball said that, during the recession, firms stripped away the "easy fat" in their businesses but are still facing a number of challenges, particularly if they are exposed to domestic markets and the threat of a double-dip recession.

"They have done the easy stuff now and for companies to keep going, they are looking for advice to sort them out for the next piece of the journey because it's not easy to keep doing that."

Ball admitted that it will politically unpopular for government departments and local authorities to spend thousands on consultants to help them meet budget cuts.

But he insisted: "If it's pretty tough for the private sector to do this without some outside help, then it's going to be pretty tough for the public sector to do it.If the idea is to get more for less without seeing some of the service levels drop, they will need some outside help."

The advisory unit will put E&Y in direct competition in Scotland with firms such as Accenture, Capgemini and other "big four" accountancy firms such as Deloitte which offer consultancy services.

Although demand in this area has increased since the outbreak of the banking crisis, Ball admitted E&Y will also be seeking to steal market share from its competitors.