Recruitment firms’ profits expected to suffer amid jobs gloom
Analysts expect recruitment firms to report a sharp fall in profits this week as an uncertain economic environment impacts the jobs market.
Hays, PageGroup and Robert Walters will update investors on their performance over the coming days, with profits predicted to fall sharply.
According to a consensus cited by AJ Bell, Robert Walters is expected to report pre-tax profit down 48 per cent on Tuesday, PageGroup 30 per cent on Wednesday, and Hays 15 per cent on Thursday.
Economic uncertainty has impacted the jobs markets and has made employers more cautious about hiring.
Susannah Streeter, head of money and markets at investment platform Hargreaves Lansdown, said: “The forecasts for a fall in profits for leading UK-based recruiters tallies with businesswide surveys indicating that employers are becoming more cautious about taking on new workers, as economic growth stumbles.”
The accountancy firm BDO’s employment index highlighted that businesses aren’t hiring as much, Streeter said, as they continue to face pressures and remain cautious of “difficult conditions” ahead.
The UK economic output shrank by 0.5 per cent in July, she said, which could be due to strikes and poor weather, but data from the ONS shows the “weakness” is beginning to impact the labour market.
The unemployment rate in the UK has risen 0.5 per cent since the previous quarter, now sitting at 4.3 per cent.
“The Bank of England has pressed pause on rate hikes for now, but the outlook is still clouded in the UK and overseas labour markets, particularly with the World Bank halving its forecast for global trade growth which is likely to have a knock on impact on employment,” Streeter said.
Russ Mould, investment director of investment platform AJ Bell, said jobs are an important indicator for economic health but the data comes with an “inbuilt lag”, as hiring processes can be a lengthy matter.
“That caveat aside, all three updates should be informative, not least because the firms have gone from reporting bumper fees growth to noting a marked slowdown in activity and drop in confidence among clients, even if they have continued to flag skill shortages in areas such as technology and engineering,” he said