Recruiter's profits hit hard due to hiring slowdown, causing a drastic drop in Hays' stock value.
** struggles as economic hardships hit the recruiting industry**
Shares for Hays, a London-based recruitment firm, took a massive hit on Thursday, plummeting to levels not seen in around 14 years. The company's pre-exceptional operating profits for the quarter ending June 2025 are expected to be approximately £45million, significantly lower than analyst predictions of £56.4million and a more than 57% decrease compared to last year.
Hays attributed these challenges to a more difficult permanent employment market. The economic uncertainty that plagues clients and candidates alike has led to less confidence in the job market. As a result, job growth is sluggish, and companies are being conservative with their hiring.
By midday, shares in the company had dropped 11.5% to 62.15p, making them the FTSE 250 Index's worst performer for the day. Over the past year, Hays shares have lost more than 40%, a slump that hasn't been seen since December 2011.
Several factors, including elevated interest rates, high energy prices, and tariffs imposed by President Donald Trump, have contributed to the cooling global job markets. According to reports, these factors are causing a ripple effect across the world, leading to lower income for recruiters like Hays.
Hays anticipates a 9% like-for-like decline in net fees, including a 14% drop in permanent fees. In its largest territory, Germany, the group is forecasting a 5% decrease due to intense competition from Chinese electric vehicle manufacturers and other issues facing the country's automotive sector, such as lower sales and profits.
Hays also expects falls of 9% for the Australia and New Zealand region and 13% for the UK and Ireland. Notably, approximately 276,000 jobs have been lost in Britain since the Autumn Budget, as outlined in HMRC figures released last week.
The Budget included a 6.7% rise in the National Living Wage to £12.21 per hour and an increase in employers' National Insurance contributions. These changes have certainly created added pressure on businesses, leading to a slowdown in hiring.
In response to the slowdown, Hays has reduced its own consultant headcount by 5% during the opening three months of 2025, with some redundancies in the British Isles. Other London-listed recruiters, such as Robert Walters and PageGroup, have also trimmed their staff numbers recently.
Russ Mould, investment director at AJ Bell, commented, "Companies are worried about the economic outlook, and they're reluctant to take on full-time staff, potentially not replacing anyone lost to natural turnover. At the same time, individuals are worried that if they move job, they'll be in the 'last in, first out' firing line if companies look for new cost savings."
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#### Further insights:
The current challenges faced by Hays and the global recruitment industry can be attributed to a confluence of factors. Economic slowdown, shifts in employment patterns, and increased demand for flexible hiring arrangements are all consequences of elevated interest rates, high energy prices, and tariffs.
The International Labour Organization's May 2025 update highlights how the global economic downturn is negatively affecting labor markets worldwide. Geopolitical tensions and trade disruptions are contributors to uneven job growth and increasing income inequality.
While the technology sector, sales and marketing, and administrative support remain prominent recruiting areas globally, the overall job growth pace is moderated by economic headwinds. Recruitment companies like Hays must focus on offering agile and specialized talent solutions to meet the varying needs of employers. Specifically, they must prioritize short-term, project-based roles to help companies manage costs and adapt quickly to the environment.
Recent data and studies indicate that the shift towards flexible employment models, comprising contract, freelance, and consulting roles, is accelerating. This trend is driven by a desire for workforce agility in an increasingly uncertain economic climate. McKinsey data and studies from recruitment platforms like Oyster show a nearly 46% increase in contractor engagements from 2023 to 2024, along with a decline in full-time hiring.
- With the economic hardships hitting the recruiting industry, diversifying investment portfolios by considering recruitment firms like Hays could pose a risk for some investors, particularly in sectors sensitive to economic fluctuations.
- To mitigate financial losses from the slowdown in the recruitment industry, individuals may want to reassess their savings strategies, perhaps allocating a portion towards emergency funds or low-risk investments.
- In light of the challenges faced by recruitment firms such as Hays, businesses seeking long-term growth might want to consider insurance options that protect against economic downturns, including mortgage protection and business interruption insurance.
