The London permanent recruitment market grew at its weakest level in eight months during July. Its hiring growth was also lower than any other UK region, according to data from the Recruitment and Employment Confederation. Country-wide permanent placements reached a 27-month high, while temporary placements increased at the fastest rate for almost two-and-a-half years. Candidate availability continued to decline markedly, with staff availability across the UK falling to its lowest level in 18 months.
In the public sector, demand for both temporary and permanent workers slowed. This weighed heavily on recruiters such as Gattaca (GATC), which saw its share price drop almost 8 per cent following the release of its full-year trading statement. The group reported a 4 per cent drop in like-for-like net fee income, citing ongoing Brexit negotiations, IR35 tax changes and the UK general election as undermining confidence. The UK accounted for 90 per cent of Gattaca’s revenue at the end of January.
The group looks to be doing the right things to improve the situation. It is heavily tilted towards skill-short STEM markets – those requiring candidates with a focus on science, technology, engineering and mathematics. It also increased its ratio of fee earners to support staff to 73:27 from 71:29 in July last year. Contract and permanent fee income dropped at the same rate during the year, but technology jobs bore the brunt more than engineering, falling 6 per cent. While UK headcount reduced slightly, the international business made up ground.
Uncertainty around Brexit has led to delays in agreeing contracts for many companies in recent months. That aside, the uncertainty surrounding the general election also undermined confidence and the introduction of the IR35 tax change – which changes the rules for those contracting for the public sector, in many cases meaning an increase in taxes – has made life more difficult for those supplying government and public bodies.
However, some recruiters have thrived in recent months. Against expectations, Robert Walters (RWA) saw a 27 per cent increase in net fee income from the UK business, thanks to a "notable upturn" in financial services recruitment – a sector widely expected to be hit hard by Brexit as companies relocate to maintain passporting rights.
There are, however, indications that the initial signs of recovery for Gattaca may be beginning to appear. The decline in net fee income slowed to 1 per cent during the second half.
