Parent group Deloitte Touche Tohmatsu blamed the tight credit market and economic uncertainty for the u-turn on the plans, which were announced last year.
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“We gave this our very best efforts, but concluded, with advice from our outside legal and financial advisors, that it is just not prudent to complete this transaction in this environment,” said James Copeland, chief executive officer of Deloitte Touche Tohmatsu.
“We began this process at a time of more robust consulting, capital and credit markets – all of which have deteriorated in the past 14 months."
The aftermath of the Enron and WorldCom scandals in the US has produced strong pressure on firms to separate auditing and consulting arms. Deloitte Consulting said that its consulting arm would continue to provide a broad set of professional services, "principally focused on nonaudit clients".
Analyst firm Ovum Holway said, restricting Deloitte Consulting to non-audit clients is "a huge blow for a firm that had hoped to capitalize on existing client relationships".
It described the decision to pull the separation as "an embarrassing volte-face for the firm, which had made a convincing case for separation - ie being a truly independent private consulting firm, free from its auditor parent and shareholder pressure and technology agnostic".