"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 US employees, representing less than five percent of our US workforce," said an EY spokesperson.

EY had been attempting to attract partners for several months before calling off the proposed overhaul. The plan aimed to tackle regulatory concerns regarding potential conflicts of interest. EY is one of the "Big Four" accounting firms, and the other three companies, KPMG, Deloitte and PricewaterhouseCoopers, are also laying off staff due to the economic downturn.

The wave of layoffs across Corporate America is largely attributed to the Federal Reserve's quantitative tightening. Accenture is cutting 19,000 jobs, or approximately 2.5% of its staff globally. Meanwhile, McKinsey is reportedly cutting 1,400 roles, or 3% of its employees.

The Financial Times first reported the EY cuts and highlighted that they would primarily affect the consulting side of the business. The newspaper also reported that cost cuts were being planned in the UK as a result of the failed breakup plan.

EY proposed the split as a way to address regulatory scrutiny regarding conflicts of interest between the audit and consulting arms. However, the plan was abandoned after US teams raised objections over how to structure the breakup.

Also Read: EY breakup plan stalled on partners split

Rosanna Lander, the firm's UK head of public relations, confirmed that the announcement was specific to EY in the US and that there were no similar plans in the UK, as per the BBC. The layoffs will be a disappointment to affected employees and are likely to have a significant impact on the company's operations in the consulting sector, which is a key component of EY's business.

(With agency inputs)