While net fee growth in the recruiters was driven by international businesses, they all said there was a pick-up in the UK as the initial shock of last June’s Brexit voted faded.
"Following on from better-than-expected numbers from FTSE 250 rivals Robert Walters on Tuesday and PageGroup on Wednesday Hays has today become the third big recruitment firm to show improved fee momentum not only abroad but at home, to suggest the UK economy is still doing better than many had feared it would after the referendum vote last year," said Russ Mould, investment director at AJ Bell.
Employers were reluctant to hire after the UK’s vote to leave the European Union but it seems since they’ve had time to process the outcome they’ve been getting back to business as usual.
Hays reported a 4% drop in third quarter like-for-like net fees in the UK and Ireland but it compared to a 10% decline the previous quarter.
Overall net fees rose a record 10% on a like-for-like business, boosted by the Continental Europe and the rest of the world division and two extra working days as a result of a later Easter this year.
Hays now expects its full year operating profit to reach the top end of market forecasts of £199mln to £209mln.
PageGroup, formally known as Michael Page International, reported gross profit growth of 9% to £170.3mln in the first quarter.
France and Germany were the main contributors but the company said it delivered its best UK performance for a year.
The company posted flat UK gross profit but that compared to a 6.7% drop in the fourth quarter following the initial shock of last June’s vote to leave the European Union.
Robert Walters reported a 33% increase in net fee income (gross profit) to £78.3mln in the first quarter. In the UK, net fee income increased by 27% to £23.9mln despite worries of risks arising from Brexit.
The group said the UK was helped by a notable upturn in financial services recruitment activity in London plus good performances in legal recruitment and the UK regions.
Not out of the woods yet...
While the recruiters have seen a rebound in UK hiring since an initial decline after Brexit, they are not out of the woods yet.
With the UK’s formal exit from the EU underway, PageGroup’s chief executive Steve Ingham acknowledged the potential risks facing the company.
He said candidate and client confidence levels were still affected by Brexit uncertainty during the first quarter, albeit with improved profits.
But keeping this up will prove challenging as Brexit negotations begin, the analyst warned.
"Now they trade at 12-month highs the bar of expectations is much higher and they will need to keep showing improved fee income growth abroad and in the UK to keep their shares on the march.”
Jobless claims rise…
Official data released separately yesterday showed the number of unemployment claims last month rose by the most since July 2011.
Unemployment benefit claimants increased by 25,500 to 765,400 in the three months period to end-March when Prime Minister Theresa May triggered Article 50 to begin formal Brexit negotiations over the next two years.
In the three months to February, the UK jobless rate held steady at 4.7%.
The number of people in work rose by a modest 39,000 in the three-month period, marking a slowdown from the previous quarter’s 92,000 gain.
Still, the employment rate also reached a record high of 74.6%.
Average weekly earnings climbed 2.3% year-on-year during the quarter, compared to 2.2% growth in the prior three months. Adjusted for inflation, however, pay growth only inched up 0.2% over the period, the weakest increase since mid-2014.
Kathleen Brooks, research director at City Index Direct, said the chief concern was the rise in jobless claims.
“Although one month’s data does not make a trend, it does suggest that we could have reached peak employment in the UK, and as we progress through 2-years of Brexit negotiations, we may see labour market weakness ahead,” she said.
Rising inflation eating away wage growth…
Rachel Smith, the CBI’s principal labour market economist, noted that rising inflation has caused real wage growth to slow. Inflation averaged 2.1% in the three months to March, above the Bank of England's 2% target.
“With inflation rising, real pay growth has fallen back for the third month in a row now,” she said.
“This remains a concern, so it’s vital that productivity increases if we are to see earnings head up."
She added: “Developing a modern industrial strategy, making the most of a skilled workforce that delivers across the UK, will be key to helping firms give productivity a meaningful boost.”
Labour market holds up, but only for now…
The UK labour market is still seeing overall improvement, according to Howard Archer, chief UK and European economist at IHS Markit Global Insight.
However, the economist believes the labour market will come under increasing pressure from slowing economic activity over coming months as Brexit negotiations begin.
“The labour market has been helped by the economy’s extended resilience since June’s Brexit vote, but mounting signs that consumers are now limiting their spending fuels belief that the coming months will be increasingly difficult for the economy and for the jobs market,” he said.
“Deteriorating consumer purchasing power and likely increasing business uncertainties and caution over Brexit look are expected to take a mounting toll on growth and employment.”
Archer added that he expects to see companies trying to keep pay growth down to limit total costs as input prices rise on the back of a weaker pound.