Recruiter Hays reports 37% collapse in net fees income

Employment agency's 'dreadful summer' prompts job losses and office closures

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.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk