Thursday, 8 January 2009

Michael Page, Hays paint grim UK recruitment picture

(By Anthony Miller) Two of the UK’s largest recruitment players, Michael Page International (MPI) and Hays, confirmed difficult conditions in the UK market in their respective December quarter trading updates (see here for MPI and here for Hays). Q4 UK gross profit (the key financial measure for recruitment firms, representing the gross margin on contractors and commission on permanent recruitment – also called net fee income, NFI) fell at MPI by 20% and at Hays by 22%. No specific numbers were given for the IT sector though Hays reported “a reduction in activity”. The two players differed widely in Continental Europe; Hays saw NFI rise 21% (like for like) in CE and rest of world, whereas MPI saw declines in every major country market, the worst being Spain (-36%) followed by Italy (-20%) and Netherlands (-15%). However, Hays saw weakening conditions in France, Benelux and Spain towards the end of the quarter. Both firms fared worse in permanent recruitment than contractors. I’ll give more detail after this morning’s conference calls.


I asked both companies what they were seeing in IT recruitment and the differences were interesting. MPI only has a very small IT business in the UK (3 locations compared to 50 for Finance recruitment) and said this was doing well and expected to grow in 2009. I guess this is the ‘niche’ effect. Hays only gets 7% of UK NFI from IT recruitment but about 80% in Germany. The drop off in UK IT recruitment was not specific to the finance sector; it came mainly from Hays’ clients in the IT and software industry, which frankly comes as little surprise. Quite a different picture in Germany, though, where Hays still sees strong demand for higher level language skills. However the picture on SAP skills demand in Germany, SAP’s heartland, is changing. A few months ago, demand outstripped supply; now these are in balance. So it looks like we have passed the peak and I would expect growth in demand for SAP-related services to ease across the board. This will not be good news for recruitment firms and SIs alike, especially as SAP services tend to carry premium fees and margins.

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