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As the economy reopens recruiters up and down the country are working flat out to fill roles. Hiring has surged and the Bank of England predicts unemployment, which stood at 4.7% in the three months to April 2021, will rise only slightly even as furlough is phased out, peaking at just under 5.5% in the third quarter of 2021 — far lower than initially feared.
According to a survey of big recruitment firms, the number of permanent jobs available in England rose at the fastest rate since 1997 when the economy started to reopen. All of which bodes well for business at Hays (HAS), which is due to post its fourth quarter results on Thursday, ahead of full-year results due out at the end of August.
Fellow recruitment company PageGroup (PAGE) has just given its second quarter trading update with a strong recovery story. Delivering second quarter gross profits 2% ahead of 2019 at constant currency rates and almost double last year’s level bodes well for investors in Hays next week.
PageGroup has raised its operating profit guidance for this year to between £125 million and £135 million. That’s a far cry from the £17 million it achieved last year, showing things are definitely turning around as hiring activity gains pace.
However, that is not to say the jobs market is flowing smoothly, with everyone after work able to find a job. The empty shelves at supermarkets are proof of the short supply of lorry drivers right now and news, on a daily basis, that businesses up and down the country are struggling to find staff, suggests certain sectors are suffering bottlenecks.
And while part of that is put down to Brexit, as a sharp drop in EU workers has hit firms like transport operators hard, the government’s job retention scheme is also stopping the usual ebb and flow of workers in many sectors.
Furloughed staff currently still receive 80% of their usual wage, with employers paying the first 10%. That contribution will increase next month before the furlough scheme comes to an end at the end of September. And there are some analysts who think it should end sooner, saying that furlough is stifling the jobs market, with hospitality employers finding people are reluctant to leave furlough for a new job that could fall through if cases rise again.
The industry body UK Hospitality, has said about 200,000 people in the sector are still on full furlough. Many of these work in nightclubs and other venues that have been closed ever since the very first lockdown.
Hays for one is less reliant on this sector for its profits than the office sector. But even here huge changes have altered the landscape, giving recruiters a new world of workers to find suitable work for.
Home-working has changed prospective candidates’ wants and needs and, with the pandemic still very much ongoing, not only the end of the furlough scheme, but also the appetite for job-change during a period of such uncertainty is affecting how some sectors operate.
Hays has suffered as companies have cut back on hiring new staff, which was evident from the decline in fees, which slowed to 19% during the second quarter, compared with a 29% fall in the first three months of the year.
Net fees were down almost a quarter over the first half, which prompted operating profits to fall by around three-quarters and that was despite a 14% reduction in headcount in a bid to cut costs where it could.
As for most recruitment firms, the pace of Hays’ own earnings recovery will be heavily dependent on the shape of the economy as it continues to reopen and, as a result, how quickly hiring activity returns to pre-pandemic levels. Earnings are forecast to drop to 2p a share this year, before bouncing back to 5.83p in 2022.
At the first-half stage Hays revealed that it would resume ordinary dividends in August and pay a special dividend totalling £100 million as part of plans to return £150 million in surplus capital. Cash generation had proven more resilient than anticipated at the time of its £200 million equity raise in April, management said. Analysts at Numis forecast an annual dividend of 6.67p a share for the current financial year.
Hays’ Q4 trading update is due out on Thursday.
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