Warnings as Brexit and China stifle recruitment firms

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Two of the UK’s largest recruitment firms have both issued lacklustre trading statements as market conditions deteriorate, a trend confirmed with the latest data from the UK resourcing industry.

With worsening macro-economic indicators in continental Europe, particularly in Germany, and in the US, there are signs that growth in these markets may slow. In Greater China, confidence in mainland China continues to be affected by trade tariff uncertainty and the social unrest in Hong Kong is increasing” – Steve Ingham, PageGroup

Brexit uncertainty, US-China trade wars and the protests in Hong Kong and France were all cited to in third-quarter trading statements this morning.

PageGroup recorded a 24% drop in profits in China and a 4% slump in the UK, while rival recruiter Robert Walters also indicated that the Chinese market was troublesome and that UK fee income was down 11%. It described UK client and candidate confidence as “generally weak” in both the recruitment and recruitment outsourcing markets.

Steve Ingham, PageGroup chief executive, said: “The majority of the group’s regions were impacted by increased macro-economic and political uncertainty in Q3. Consequently, group gross profit growth slowed to 2.1% in constant currencies from 7.4% in Q2.

“We saw standout performances in Germany, India, and Latin America, as well as a strong performance in the US, despite a slowing financial services market in New York. However, we saw increasingly challenging trading conditions in many of our larger markets, including Greater China, the UK and France.”

Shares in PageGroup slumped 11% when trading opened this morning, while Robert Walters stock fell 10.2%. Other recruitment firms also saw their share price fall in reaction to the trading updates.

Ingham added: “The deterioration in trading conditions seen during Q3 across the majority of our regions is anticipated to continue. In the UK, heightened Brexit related uncertainty is expected to remain as we approach and go beyond 31 October.

“With worsening macro-economic indicators in continental Europe, particularly in Germany, and in the US, there are signs that growth in these markets may slow. In Greater China, confidence in mainland China continues to be affected by trade tariff uncertainty and the social unrest in Hong Kong is increasing.”

His counterpart at Robert Walters echoed these sentiments. Its chief executive and founder, Robert Walters, commented: “The Group delivered net fee income growth of 2% (4% actual) during the third quarter as trading conditions softened across a number of markets. The ongoing uncertainty surrounding Brexit, the US-China trade tariff standoff and Hong Kong protests, coupled with the significant impact of the gilets-jaunes protests experienced earlier this year [in France] have combined to create a unique set of cumulative headwinds.

“As a result of these macro uncertainties, the group now anticipates delivering annual profits in line with the prior year. Whilst visibility is limited, the group’s international footprint and diverse blend of revenue streams covering permanent, contract, interim and recruitment process outsourcing ensures we are well positioned to respond to any market opportunities as and when they arise whilst also having the agility to closely manage our cost base.”

The latest data from KPMG and the Recruitment and Employment Confederation (REC), released today, has also indicated that heightened political and economic uncertainty regarding Brexit is affecting hiring activity.

Permanent staff appointments fell for the seventh month in a row, while temporary placements rose only modestly. Growth in demand for staff softened in September, with overall vacancies rising at the weakest rate since January 2012.

The supply of both permanent and temporary candidates continued to decline – often linked to people becoming more hesitant to look for a new job.

Neil Carberry, REC chief executive, said: “Businesses are positive about their own prospects, but ongoing Brexit uncertainty has led many firms to delay projects and hiring decisions. Vacancy growth has fallen to its lowest since 2012. The UK’s vibrant temporary work market is playing an important role in helping employers to manage the ongoing uncertainty and jobseekers to find work.

“There are deeper issues which must be addressed to secure the UK’s future prosperity. Productivity is falling, and there are skills shortages in vital sectors across the economy. Solving these problems must be top of the government’s to-do list once the Brexit deadlock has been broken.”

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