Hays shares fell sharply on Monday after the recruitment group reported declining fees amid continued weakness in permanent hiring, with analysts warning that employers remain reluctant to commit to expansion as economic uncertainty weighs on the jobs market.
The London-headquartered company, one of Europe’s largest recruitment agencies, said net fees fell 3 per cent on a like-for-like basis in the three months to September 30.
Fees from permanent recruitment dropped 7 per cent, reflecting subdued demand for new employees and a fragile hiring environment across parts of Europe.
Hays shares fell as much as 12 per cent in early trading before recovering some ground to trade about 7 per cent lower, as investors assessed the scale of the challenge facing the group.
The UK and Ireland were among the weaker markets, with net fees declining 5 per cent and permanent recruitment fees falling 9 per cent.
Russ Mould, investment director at AJ Bell, said the results underscored how difficult conditions remained for recruitment businesses, particularly those dependent on permanent appointments.
“The job market is as tough as ever, particularly for permanent roles,” he said, suggesting companies lacked the confidence to invest in their businesses for growth.
The results highlight a persistent problem for recruitment agencies: employers are taking longer to fill vacancies and remain cautious about adding permanent staff, leaving firms competing for fewer assignments while facing pressure on fees.
Chief executive Mark Dearnley said permanent recruitment activity remained uneven, with strong growth in North America offset by continued weakness in Northern Europe.
“Permanent activity remains mixed with sustained strong growth in North America but ongoing fragility in Northern Europe,” he said.
Dearnley added that the group had made further progress on cost controls and productivity initiatives, arguing that its medium-term targets remained achievable.
Hays has been reshaping its international operations in response to the downturn. Over the past year, it closed its businesses in Thailand and Mexico and divested operations in the Czech Republic, Denmark, Hungary, Luxembourg, Romania and Sweden.
The group said it had also made “good progress” in reviewing operations in Belgium, Brazil, Greater China, Malaysia, the Netherlands, Singapore and the United Arab Emirates, with “advanced discussions” under way for several businesses.
The strategy is intended to concentrate resources on 16 core markets and give the group a more focused geographical footprint. Hays has also reduced staffing, cutting worldwide consultancy headcount by 14 per cent in the year to the end of March and its non-consultancy workforce by 7 per cent.
Mould warned that cost-cutting alone would not be sufficient to secure a recovery, arguing that Hays needed to adapt its business to changing demand and concentrate on stronger markets and higher-paid permanent roles.
Richard Hunter, head of markets at Interactive Investor, said Hays remained in a “difficult spot”, facing challenging economic conditions alongside uncertainty over artificial intelligence’s impact on employment.
However, he said the group’s efforts to target specialised roles that may be less exposed to automation, combined with its own investment in AI, could eventually improve productivity and profitability.
For now, the fall in recruitment fees suggests a recovery remains elusive, leaving Hays reliant on operational changes and an eventual improvement in employers’ appetite for permanent hiring.
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