Recruiter Hays reports 37% collapse in net fees income
Employment agency's 'dreadful summer' prompts job losses and office closures
Friday 10 July 2009
Hays has become the second major UK recruitment agency in a week to axe staff and post a slump in fees, as the industry braces itself for the further pain of a "dreadful" summer.
Just days after Michael Page painted a bleak picture of the job market, Hays revealed that net fees had fallen 37 per cent between April and June.
Paul Jones, analyst at Panmure Gordon, said: "It feels like it could get worse before conditions level out, never mind improve." He added: "It will be a dreadful summer. People are just trying to survive, not move. Also companies out there face enormous challenges, which normally means firing, not hiring."
Alistair Cox, Hays' chief executive, said earlier this year that it was the "toughest job market" he had ever seen. Presenting the results yesterday, he added that it had been "another tough quarter with continued reduction in demand across all the 28 countries in which we operate".
The fall in revenues prompted the company to axe 26 per cent of its workforce during the financial year, which ended on 30 June. It also closed 15 offices in the last quarter alone.
Mr Jones said: "Short-term visibility remains poor, especially as recruiters now have to second-guess employees who could pull out at any moment."
Michael Page posted a 45 per cent fall in net fees during its second quarter on Monday and revealed that it had slashed 1,800 jobs, "in response to market conditions, retaining our more experienced and stronger people".
Hector Forsythe, analyst at Oriel Securities, said the job cuts were not an indication of problems: "Even in good times recruitment firms have a high level of churn. It is crucial that they hold on to the older, more experienced workers, which they have done so far."
Steve Ingham, Michael Page chief executive, warned of "a challenging third quarter as we enter into the seasonally quieter summer period both in continental Europe, which was later in the downturn, and in the UK".
It is often seen as a late cycle sector as it tracks unemployment to some extent, which itself lags a downturn. The signs aren't good for the industry as earlier this year the British Chambers of Commerce predicted that unemployment would surpass three million by 2010, levels not seen for two decades.
Mr Jones of Panmure said: "First new vacancies dried up, then people stopped specific projects like IT needing temporary workers, now the smaller companies are getting aggressive on the rates they're charging." The recruiters are predicting a 10 per cent drop in the rates from peak levels. Headhunters make their money from commissions on placing staff, generally equating to between 15 and 20 per cent of the salary, but those commissions are under threat from smaller players in a hugely fragmented market. Hays estimated that there were more than 10,000 recruitment companies registered in the UK, but despite the impending fee battle, the larger companies are expected to come out stronger as companies become more risk averse in the downturn. Analysts expect many niche players to be shaken out of the market.
Further bad news for recruiters comes as experts have linked a growth in headhunters' business with a rise in GDP of about 1.5 per cent. The Government believes GDP will hit those levels in two years, but most independent forecasters believe it will be longer.
- 1 Howard Jacobson: Let's see the 'criticism' of Israel for what it really is
- 3 Belgium fan Axelle Despiegelaere lands L'Oreal campaign after World Cup viral photo
- 4 Britney Spears sings 'Alien' without Auto-Tune in embarrassing leaked audio clip
- 5 PornHub begs users to stop uploading video clips of Brazil getting beaten 7-1
Instagram of US airport security chiefs: Lipstick knives and IED training kits among items seized
Game of Thrones author George RR Martin says 'f*** you' to fans who fear he will die before finishing Westeros saga
Mick Jagger denies being World Cup curse and reason for Brazil’s embarrassing defeat
Israel-Gaza crisis: ‘We just want it to end… We don’t deserve to live like this’
Israel-Gaza crisis: Eight killed in Gaza Strip cafe while watching World Cup semi-final
Sustained immigration has not harmed Britons' employment, say government advisers
Australia facing international condemnation after turning around Sri Lankans at sea
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
There’s a nasty smell in the political air – and it’s coming from the Tories
iJobs Money & Business
£12 - £15 per hour: Cameron Kennedy Recruitment: Excellent opportunity to join...
£400 per hour: Orgtel: Technical Business Analyst - Banking - Bristol - £400pd...
£38000 - £42000 per annum + competitive: Real Staffing: Required skills:Previo...
£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...