Hays, the London-listed recruitment group, has now recorded 14 straight quarters of falling net fees, extending a slump that shows little sign of ending in Europe. The company said like-for-like net fees fell 3% in its fiscal first quarter, a smaller decline than analysts had expected and an improvement from an 8% drop a year earlier. Despite the better-than-feared figure, the shares slid 10%, according to Reuters, as investors focused on the persistent weakness in key European markets.
Net fees are a key measure for recruiters: they represent the revenue a staffing firm keeps after paying the wages of the temporary workers it places, and they are a direct gauge of hiring demand. A 3% decline means Hays placed fewer workers or filled lower-value roles than in the same period last year, on a like-for-like basis that strips out currency swings and acquisitions.
Europe drags, but the US and Asia pick up the slack
The regional split tells the real story. North America and parts of Asia delivered solid growth, with net fees rising 8% in the US, 12% in Canada, 27% in China and 2% in Japan. That strength helped offset continued weakness in Europe, where net fees fell 6% in Germany and 5% in the UK. Germany is Hays' largest market, and its temporary staffing business there has been particularly soft, according to CFO James Hilton.
Germany's industrial base has been under pressure for some time, with manufacturers grappling with high energy costs, weak export demand and a slow shift to electric vehicles. That has rippled through the labour market, reducing demand for temporary and contract staff. The UK, meanwhile, has seen hiring slow as businesses hold back on investment amid uncertainty over the economic outlook and interest rates. Both markets are major profit centres for Hays, so their weakness weighs heavily on group results.
The US and Canada, by contrast, have proven more resilient. The American labour market has remained relatively tight, and companies continue to compete for skilled workers in sectors like technology, healthcare and professional services. China's 27% jump stands out, though it comes off a low base after several years of pandemic-related disruption and a property-led slowdown. Japan's modest 2% gain reflects a gradually improving corporate hiring environment.
Business sales and a cost-cutting drive
Hays also said it is in talks to sell several businesses, a move that would allow it to streamline operations and focus on its core markets. The company did not name the units or the potential buyers, and there is no guarantee a deal will be reached. Such disposals are common when recruiters face prolonged downturns: they free up capital, reduce exposure to underperforming regions and simplify the story for investors.
The recruitment industry is highly cyclical. When economic growth slows, companies cut back on hiring, and staffing firms feel the pinch quickly because their revenue is tied directly to placement volumes and the length of assignments. Hays and its peers, including Robert Walters and PageGroup, have all reported weaker demand over the past two years as central banks raised interest rates to fight inflation. Higher borrowing costs dampen business investment and consumer spending, which in turn cools the labour market.
Now that inflation has eased in many economies and central banks are beginning to consider rate cuts, there is hope that hiring could stabilise. But the recovery is likely to be gradual, and Europe's structural challenges — sluggish growth, weak manufacturing and political uncertainty — may keep a lid on demand for longer than in the US.
What it means for investors
For everyday investors, Hays' results offer a window into the health of the global labour market, which is a key input for the broader economy. A sustained hiring slowdown can signal weaker corporate confidence and slower GDP growth, which may affect everything from bank earnings to consumer spending. The fact that the US and parts of Asia are holding up better than Europe is consistent with the wider pattern of American economic outperformance in recent years.
The 10% share price drop despite the smaller-than-expected fee decline suggests investors were hoping for clearer signs of a turnaround. When a company has missed expectations for 14 quarters in a row, the market tends to focus on the direction of travel rather than the absolute number. A 3% drop is better than an 8% drop, but it is still a drop — and until Hays can report growth in Germany and the UK, the stock is likely to remain under pressure.
Investors will be watching several things from here: whether the business sales materialise and at what price, how quickly European hiring recovers, and whether the US and Asian momentum can be sustained. They will also keep an eye on European bank stocks and broader market sentiment, as well as China's economic data for clues about global demand. For now, Hays remains a story of two halves: a resilient Americas and Asia, and a Europe that is still struggling to find its footing.
