Image may be NSFW.
Clik here to view.
An update on the fourth quarter (ended 30 June) from multinational, multi-discipline recruitment firm Hays points to a more uncertain UK private sector outlook. Net fee income (essentially gross profit) from its UK and Ireland operation fell 6%, reversing a slight increase in H111 (see (see Hays reports strong growth despite UK public sector). Although this decline is being driven by the continuing slump in the public sector, where net fees were down 34% vs. 36% in the first half, it is the private sector where Hays is now seeing a worrying dip.
Private sector, which makes up 78% of the UK’s net fee income, grew net fees by 7%, but this was down starkly from the 27% growth notched up in H111. Hays blamed “tougher market conditions” in the banking sector and City-related businesses, which had previously been more buoyant – although it pointed out that construction and property, IT, and sales & marketing remained strong. It is responding by cutting more cost out of the business - reducing non-consultant headcount to generate £7m in savings going forwards. Consultant headcount had already been cut by 7% in H1 in response to the public sector slump.
Hays will be mightily relieved to have its broad based, international business to lean on, which helped the overall business to 11% net fee growth in the quarter. The two international territories, Asia Pacific and 'Continental Europe and Rest of the World' (CE&RoW), now account for 67% of total net fees. The territories grew NFI 18% and 28% respectively on a like for like basis. CE&RoW is now Hays’ biggest territory, and is really driving the international operations forward. Germany in particular stormed ahead with 28% growth in net fees, meanwhile Brazil, Denmark, Italy, Poland, Russia and UAE each achieved net fee growth of over 40%.
Unsurprisingly then, CE&RoW is the main area for investment. Hays increased consultant headcount by 8% and opened new offices in Dublin, Curitiba in Brazil and Poznan in Poland. Meanwhile, Asia Pacific consultant headcount increased just 1%, despite a strong Q4 performance and notable net fee income growth in Australia and New Zealand (up 16%) and in emerging markets like China, Singapore and Hong Kong, where NFI was up over 50%.
Back in the UK, the dip in banking and financial services is significant. It echoes similar messages from rival Robert Walters this week (see UK 'still' difficult at Robert Walters). Banking and financial services drove the private sector recovery last year, but this suggests that it could have been more down to a release in pent-up demand, rather than a return to the days of big spending. It is a sure sign that belts remain tight, and could be getting even tighter.
