Hays cuts UK jobs on gloomy update

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The Independent Online

A deterioration in the dire UK jobs market took its toll on Hays in the last quarter, as the recruitment company posted a sharp fall in net fees, took a further axe to UK jobs and warned it did not see any green shoots for private sector jobs globally.

Hays chopped a further 600 jobs, equal to 11 per cent of its global workforce, in the three months ended 31 March 2009, which included 250 staff in the UK. Over the past 12 months, Hays has slashed 900 jobs in the UK, although a spokeswoman said this was largely through natural wastage. It also closed 14 offices in the UK and Ireland over the quarter.

Hays, which has operations in 27 countries, said that net fees tumbled by 37 per cent in the UK and Ireland – its worst-performing region – as demand for permanent jobs in the private sector "deteriorated further". However, Hays' public sector business, which represents one-third of its UK and Ireland net fees, grew by 3 per cent over the quarter. In particular, it benefitted from robust demand for mathematics, science and headteachers, as well as nurses and physiotherapists.

Alistair Cox, the chief executive of Hays, said: "Demand for permanent placements continues to fall across all our markets." His comments were supported by a gloomy forecast this week from the British Chambers of Commerce, which warned that unemployment will reach 3.2 million by 2010 in the UK.

On Tuesday, Michael Page, a rival international recruitment company, said its gross profit fell by 32.3 per cent to £140.3m in its first quarter and warned that activity levels had slowed in almost every sector.

On a like-for-like basis, Hays' group net fees tumbled by 31 per cent over the quarter.

Paul Venables, the finance director of Hays, said: "We don't see any green shoots in any [private sector] markets anywhere." In the UK, he forecast that about 20 per cent of the 10,000 registered recruitment companies could disappear in the next few years.

Over the quarter, Hays revealed that net fees from permanent placements plummeted by 46 per cent. The fall in net fees from temporary placements, which account for nearly half of Hays' overall business, fell by a more modest 14 per cent. Mike Allen, the analyst at Panmure Gordon, said: "While Hays' temporary order book has proven relatively stable, we suspect its permanent business will remain in freefall mode across the board."

In Asia Pacific, Hays' net fees slumped by 36 per cent, but were only 9 per cent lower at its Continental Europe and rest of the world business, as the German market for IT contractors boosted its performance.

For the year to 30 June 2009, City analysts forecast that Hays' operating profit will fall by 32 per cent to £172.2m.