Rising global risk is preventing UK and Australian companies from hiring according to Hays, the London-listed recruiter.
In Hays half-year report, released on Thursday, the company says (emphasis ours):
Through the half, the market backdrop overall became more uncertain as sentiment weakened. We saw increased macro-economic risk impact client and candidate confidence in certain markets, notably the UK and Australia as the half progressed but elsewhere many clear growth opportunities remained, notably in Europe and parts of Asia. Against this backdrop, these results reflect our selective investment to capitalise on these growth opportunities, as well as our focus on driving improved consultant productivity and cost control around the Group to maximise the Group’s operating leverage, profit and cash generation.
The reporting period covered by Hays’ update only runs to 31 December 2015. The six month period it’s looking at saw a market crash in China that kicked off a slide for stock markets around the world. Oil prices also continued their extended slide.
Since then, however, things have only got worse. Fears over Chinese growth and debt have dominated investors’ minds, concerns over Britain’s upcoming referendum over European Union membership have tanked the pound, and low oil prices have led companies to lay off tens of thousands of workers.
The tech sector, a big driver of job growth in recent years, is also stumbling as venture capitalists tighten purse strings. In the US, companies like Birchbox and Snapchat have reduced headcounts in recent months. On Friday, the UK’s Powa Technologies went into administration after running out of money. So far, 74 redundancies have been made.
In short, it’s a tough time to be in recruitment.
Here’s what Hays says about how it’s been trading since the start of the year (emphasis ours):
In the UK & Ireland conditions remain uncertain, notably in the public sector markets. The return to work in our Temp and Contractor business was in line with our expectations overall, but 4% lower than in the prior year, primarily due to strong comparatives. The private sector was flat on last year and public sector temp numbers are stable versus pre-Christmas levels, but 10% lower than the strong return to work we experienced in that market last year. We have seen slightly lower activity levels in our Perm business at the start of the second half.
Hays says the timing of Easter this year will hit fees by around 2%.
Despite difficulties in the first half of the year, Hays still managed to eek out growth in fees and profits. Net fees rose 3% to £396.9 million and per-tax profit improved by 7% to £82.4 million. Hays says this was down to investing in markets like Asia where it still saw growth in hiring. Hays operates across 33 countries globally.
But despite the performance, the downbeat outlook has left shares down around 1.3% in London after half an hour of trade.
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