UK hiring held back by Brexit uncertainty

Written by: Hannah Murphy
Published on: 16 Apr 2018

Source: Financial Times, published on 13 January 2018

Brexit fears are hampering UK hiring activity for Britain’s largest recruitment companies with no potential rebound in sight, in contrast to an increasingly buoyant performance overseas.

White-collar recruiters Hays and PageGroup this week posted strong quarterly growth in gross profits of 13 and 13.8 per cent respectively, stripping out currency movements, boosted by bumper results in their international businesses.

PageGroup also reported full-year gross profits up almost 10 per cent, with 22 individual countries posting record years.

But UK hiring has remained weak, the staffing groups said, with many employees avoiding job hunting and companies freezing capital investment plans until they have a clearer idea of what the UK’s future relationship with the EU will look like.

Hays, Britain’s biggest recruiter by market capitalisation, eked out only 1 per cent growth in UK hiring fees in its latest quarter, unchanged from the previous quarter. PageGroup posted a 2.8 per cent contraction in fees in the region in the last three months of 2017, although this was less dramatic than a 7.6 per cent drop in the third quarter.

Steve Ingham, chief executive at PageGroup, said: “With trade agreements and immigration . . . still up in the air and yet to be decided, that is taking the edge off some multinationals’ decision to hire.”

PageGroup has particularly suffered as it typically places more senior job roles, Mr Ingham said. “The higher the salary, the bigger the decision to move jobs — therefore the bigger the perceived risk . . . That’s enough to make [people] delay their move.”

Shares in both companies, which fell by about 30 per cent in the wake of the Brexit vote, have more than recovered to trade at multiyear highs.

Bucking the trend, Robert Walters, a smaller listed group, recorded UK fee income growth of 13 per cent in its latest quarter, driven in part by its human resources outsourcing division.

For its two larger rivals, however, the prolonged uncertainty has curtailed what was previously healthy growth in their domestic market, and executives remain cautious about the year ahead for the region.

They are able to lean on their fast-growing international divisions, which now account for about three-quarters of their businesses.

Paul Venables, Hays’ finance director, said that while UK hiring for his company had been stable since November 2016, he had “no idea” when profit growth would return to pre-Brexit levels.

But Hays’ overall growth in the latest quarter was “the most broad-based” the company had seen in 12 years, he said, citing confidence in Europe.

“The view on the outlook for 2018 is very positive,” said Kean Marden of Jefferies, highlighting significant investment in headcount by the firms over the course of 2017. “That wave of headcount will support stronger than expected revenue momentum in 2018.”

Rahim Karim, analyst at Liberum, noted the benefits of “relatively robust global growth”, adding that currency tailwinds off the back of sterling weakness had also helped to offset some of the UK losses.

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