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Posted on April 7, 2011
Union protests against public sector job cuts, which have dented Hays’s business this year. Photograph: Oli Scarff/Getty Images
Hays, the recruitment firm, has blamed the government spending cuts for a 37% slump in its UK public sector business in the first three months of the year.
The public sector decline was partially offset by an 18% rise in fees from private sector recruitment in the UK – boosted by construction, IT and the City – leaving Hays with an overall fee decline of 2% in this country.
Paul Venables, finance director, warned that condtions are unlikely to improve before 2013.
“I think in the (UK) public sector and in our business I would expect to see the next two years to be bumbling along the bottom, so we don’t expect to see growth,” said Venables.
Local authorities have not been replacing staff when they leave, Venables explained, adding that uncertainty in the public sector is so great that people have been opting to stay in their existing jobs.
“Today overall we are about 50% down (from peak levels), but if you look outside of the frontline services of education and healthcare we are about 65% down,” Venables said.
Overall, the Hays group recorded a 16% fee increase for the period – its financial third quarter – as sales in Asia Pacific jumped by 23%, while the continental europe and rest of world category saw an even greater increase, of 35%.
The latter category includes eight countries which recorded growth of more than 40% – Brazil, the Netherlands, Spain, Italy, Poland, Austria, Russia and Denmark. The group employs a 6,800 staff in 28 countries.
David O’Brien, an analyst at Shore Capital, said: “We think this was a strong result from Hays, although the combination of the continued weakness in the UK public sector and impact of the three natural disasters leads us to believe that it is unlikely that expectations will rise today”.
O’Brien was referring to the earthquake in Japan – which Hays said would wipe about £2m off profits this year – as well as the floods in Queensland, Australia and the earthquake in Christchurch, New Zealand. Hays said the three disasters together would cut profits by between £3m and £4m.
The company is also planning to open two new offices by the end of June, one in the south of Brazil and one in Cologne, Germany.
Shares in Hays fell by 5.20p, or 4.35%, to 114.30p in mid-day trading.