Morgan McKinley’s latest financial services employment report has provided context after Britain’s three major listed recruiters – Hays PLC (LSE:HAS), Robert Walters PLC (LSE:RWA) and PageGroup PLC (LSE:PAGE) – roundly disappointed in their respective earnings calls.
According to Morgan McKinley’s London Employment Monitor, the number of jobs available in the City’s financial district collapsed nearly 40% year on year in 2023, while the number of job seekers fell 16%.
“2022 saw a very competitive job market propelled by a robust year of wage expansion; however this changed quickly in 2023 with indications of a market slowdown influenced by the high interest rates, inflation, shortage of workers and uncertainty around the world following the post-pandemic boom and geopolitical conflicts,” said Hakan Enver, Morgan McKinley’s managing director.
“We haven’t seen a drop of this magnitude in a while,” warned Enver, who stated that employer confidence has fallen to the wayside “amid the sustained economic slowdown and conflict in the Middle East, prompting spending and hiring to be reined in”.
A total of 60,000 financial services jobs were slashed in 2023 according to the monitor, effectively undoing the post-Covid employment drive and making 2023 one of the worst years for cuts since the global financial crisis.
This is particularly concerning for Robert Walters and Pagegroup, given their larger focus on the professional services sector compared to rival Hays.
Indeed, PageGroup cut its annual profit forecast on Monday after chief executive Nicholas Kirk admitted that "activity levels are not all converting into gross profit due to ongoing lower levels of candidate and client confidence”.
Robert Walters stuck to its guns by stating that profits would be in line with market expectations, though its 10% reduction in net fee income and 9% headcount reduction didn’t exactly spark confidence.
But the downturn is not just a bugbear for the white-collar recruiters, with blue-collar recruiter Hays’ recent profit warning sounding alarm bells for the employment sector in its entirety.
Hays’ 12% year-on-year decline in group fees was primarily a symptom of its sluggish Permanent recruitment segment, reflecting a lack of confidence among employers.
As AJ Bell’s investment director Russ Mould stated: “When they are feeling confident, firms will focus on permanent hires. When they are not, they may be more careful and switch to hiring more temporary positions, to give themselves greater flexibility should trade deteriorate any further.”
Worryingly, Hays’ Temporary segment also dropped off, leaving little recourse for optimism.
All in all, the latest round of recruitment-sector earnings should be taken as a warning sign of creeping pessimism among UK employers.
On the bright side, this is likely to force the Bank of England’s hand off the interest rate lever, though not before it sticks a hard landing over a wishful soft landing.