Embattled consultancy firm PwC will spin off its government business as it continues to sink under the weight of the tax information leaks scandal.

The company announced over the weekend it has entered into an agreement to divest its federal and state government business to Allegro Funds –  a private equity investor which, according to its website, “loves investing in rebuilding great businesses”.

The government business is currently worth about 20 per cent of PwC’s revenue. Its sale to Allegro for $1 will create two independent firms, and  there will be no disruption to public sector clients, PwC says.

It comes after a parliamentary committee released an interim report which found PwC engaged in a deliberate and aggressive strategy to monetise confidential Commonwealth tax information and cover up its actions.

The NSW government has also taken the step of suspending PwC from all tax consultancy work for three months.

‘Right thing to do’

In a statement, PwC said it aimed to sign a binding agreement with Allegro by the end of July. It was the right thing to do for public sector clients and the more than 1,700 staff in the firm’s government arm, it said.

PwC says the transaction represents an exit from all state and federal government advisory work and will result in the market’s first ‘pure play, at-scale’ government business.

“This was an extremely difficult decision, but we are determined to take all necessary steps to protect the jobs of our people and re-earn the trust of our stakeholders,” PwC Australia Board Chair Justin Carroll said.

A new company CEO

Meanwhile, PwC also announced the appointment of long-time partner and Singapore-based Global Clients & Industries leader Kevin Burrowes as the company’s new CEO.

Mr Burrowes has been with PwC since 1986 and has been a partner for 19 years. He has also held senior executive positions at IBM, Credit Suisse and Royal Bank of Scotland.

“In his capacity as CEO, Kevin will lead the management team and serve as Chair of the firm’s Executive Board to ensure the firm fully responds to the need to enhance leadership and governance and reinforce our values throughout the organisation,” the company statement said.

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