Crisis in bank sector has knock-on effect on recruiter Hays

Turmoil in the banking sector and worsening economic conditions left recruitment firm Hays with a £6.5m loss in the UK and Ireland yesterday.

A 10 per cent cut in its consultant headcount to below 2,000 was offset by a 7 per cent decline in full-year net fee income to £225.3m as Hays swung from a profit of £3.6m seen in the region for the previous 12 months. It said: “Trading conditions in the UK have been tough, and became increasingly difficult as the year progressed.”

Hays weathered the UK downturn through a stronger performance in key markets such as Germany, Brazil, Canada and France. This meant group-wide net fees rose 8 per cent on a like-for-like basis to £734m, while pre-tax profits lifted 11 per cent to £122.4m.

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Chief executive Alistair Cox said: “Delivering profit growth above our net fee growth in the increasingly difficult markets we faced is a good result.”

However, Hays shares fell 7 per cent in the FTSE 250 Index as it warned overall trading conditions became more challenging during the half year to June 30, particularly over the final three months.

He added: “Whilst we continue to see pockets of growth and opportunity in certain markets, overall the environment remains challenging and in some countries very difficult.”

Hays said conditions in public sector recruitment, which represents a quarter of its UK and Ireland business, were stable after an 8 per cent decline in fees.

Private sector fees were down 6 per cent and were driven by banking and City-related specialisms as the financial sector retrenched in the economic slowdown. Hays has reduced its UK and Ireland cost base by around 30 per cent from peak levels, having taken its number of offices in the region down to 110 from 235 in 2009.

In contrast to the UK, the company’s business in Ireland performed well in the year to June 30 with net fee growth of 30 per cent.

Paul Jones, an analyst at Panmure Gordon stockbrokers, said he expects further cost cutting in reaction to the trading pressures.