Hays results ‘lay bare’ UK recruitment crisis

Recent results from the UK’s leading recruitment firms have been, quite frankly, dismal: profit has collapsed across the board as firms struggle to stay afloat amid a sharp downturn in the market.

The sector boomed in 2020 after the tech sector led to a surge in hiring, and increases in wage offers helped attract new candidates, but cost-cutting across industries, caution over hiring from firms, and potential candidates’ reluctance to move jobs have hit recruitment firms hard.

Market leader Hays’ share price has fallen by over 11 per cent year-to-date while second-biggest firm Pagegroup has seen its shares fall a 15.4 per cent.

Robert Walters’ share price has fallen more than 20 per cent in 2024.

Hays’ chief executive Dirk Hahn said that market conditions were “increasingly challenging… with low confidence levels and longer-than-normal ‘time-to-hire’.”

“The extent to which the global jobs market continues to be affected by reduced confidence was laid bare by Hays’ full year results this morning, with the recruiter reporting an over 90 per cent drop in profit before tax for the twelve months,” Julie Palmer, Partner at Begbies Traynor said.

“It is no surprise that conditions have been challenging of late for the recruiter… Hays is just one of a number of recruitment firms who have recently highlighted how difficult the market is as workers remain reluctant to change jobs amid economic and political uncertainty,” Palmer added.

Dismal operating profit, slashed net fees and job cuts

Last year, Robert Walters’ operating profit fell by 52 per cent to £26.2m. Pagegroup reported a fall in operating profit of 39.4 per cent, and Hays recorded a 51 per cent drop to £94.7m (excluding exceptional costs).

Pagegroup and Hays have both shed around 15 per cent of their workforce in the last year. Robert Walters has cut slightly less – 376 workers have gone, around eight per cent of total staff.

Net fees are a key performance indicator in the recruitment sector, and they aren’t looking great, either.

Net fees are calculated as the total placement fees of permanent candidates, the margin earned on the placement of temporary candidates, and the advertising margin.

Net fees at Robert Walter and Pagegroup have fallen by 18 per cent 14 per cent, respectively, and 6.4 per cent at Hays.

Smaller firms have struggled to stay afloat

Insolvencies have boomed in the last three years: the number of recruitment firms that went bust in 2023 rose by 14 per cent year over year.

Small firms are less equipped to deal with a significant market downturn, and many took on significant debt during the pandemic.

Firms unable to make repayments on those loans due to the sector’s wider dip were then forced into insolvency.

“As the jobs market has slowed significantly over the last year, some recruitment agencies just haven’t been able to cover what can be the sizeable costs of debt and payroll. Until the economy picks up, we’re likely to see this trend continue,” Rebecca Dacre, Partner at Mazars, said about the data.

Is there any good news?

It seems most recruiters are trying to cut costs and survive the current downturn. The outlook for 2024 is poor.

However, things are expected to pick back up again next year: Mintel has predicted a more rapid return to growth in 2025 amid a more positive macroeconomic climate.

If the UK’s economy continues to pick up speed—as is hoped—business confidence should boost hiring.

If “firms worldwide start hiring”, then Hays “might be one of the first beneficiaries”, Palmer said.

Until then, Hays and its peers will need to batten down the hatches.