This week's half-year figures from SThree (STHR) and a quarterly trading update from PageGroup (PAGE) have corroborated the widely held view that UK employers had become more circumspect on hiring decisions in the run-up to the EU referendum. SThree revealed a near one-third drop in gross profit from UK permanent placements in the three months to the end of May, while PageGroup's fees from its UK operations fell 2.3 per cent in the second quarter, with receipts from financial services placements down 7 per cent. A separate update published by rival recruiter Robert Walters (RWA) was a little more bullish on prospects for the domestic jobs market, though management also recognised increased "uncertainty in the UK" amongst employers.
The recruitment sector is seen as a useful barometer of the economy as employee churn tends to mirror the prevailing level of business confidence. So this week's trading updates will doubtless be subject to increased levels of scrutiny - but it would be folly to view them in isolation. Admittedly they were prefigured by numerous anecdotal accounts of hiring freezes ahead of the vote, but it's just possible that referendum uncertainties have simply masked underlying weakness in the UK jobs market. After all, the ONS reported that claimant counts and the labour force survey pointed to increased levels of unemployment from last November through to February, which obviously predated the now former prime minister David Cameron's decision to hold an in-out vote. Adding grist to the mill, a new report published by accountancy and financial services group BDO indicates that the UK economy was already faltering ahead of the EU vote, with job creation slowing to a two-year low.
And there are also structural issues at play. It's worth noting the recruiters highlighted the relative resilience of their contract businesses, but this is surely part of a wider trend in employment markets. There's no doubt uncertainty caused many businesses in the UK to step up their use of temporary contracts ahead of the vote, but it's also true that employers - and indeed some employees - are increasingly opting for flexible working arrangements over permanent placements.
