British recruitment firm Hays saw a 10 percent drop in fees from permanent job placements in the second half of last year, as jobseekers worried by the fragile economy decided to play safe and stay in their current jobs.
Speaking after the company reported an overall 4 percent dip in fees for the six months to December 31, finance director Paul Venables said conditions in the UK and Ireland, which account for almost a third of total net fees, are likely to remain weak.
"The permanent market continues to be tough and fragile," Venables told Reuters. "It's not so much our clients that are driving this but candidates.. (who) have got to be confident to take a risk in changing jobs and that is still pretty subdued."
Hays' group operating profit for the half-year period fell to 60.3 million pounds, down 4 percent from 63.1 million pounds in 2011 or 2 percent on a like-for-like basis showing growth at constant currency.
Fees from higher-margin permanent jobs, which contribute 41 percent of Hays group net fees, fell to 148 million pounds ($223.98 million), down 10 percent from 163.9 million in 2011, or 7 percent on a like-for-like basis.
David O'Brien, an analyst at Shore Capital with a "hold" rating on Hays, saw the company's profitability continuing to decline in the second half unless there was an uptick in the permanent sector.
"It's not about new job creation, that's not what drives the market. It's about churn of existing employees moving to new roles. (If there is) no churn or limited churn we see profitability being lower second half versus first half," O'Brien said.
Hays said its British arm posted a return to profitability in the six months to December 31 thanks to an ongoing cost-cutting programme. It achieved an operating profit of 500,000 pounds against a loss of 3.1 million pounds in the same period last year.
"We're back to modest profitability... but to really get to significant levels of profit we need a little bit of improvement in candidate sentiment for more permanent jobs," Venables said, adding that its businesses in southern Europe and Australia in particular faced similar issues.
Employment in Britain has been growing in recent months, with the number of people in work reaching an all-time high in the last quarter of 2012. However, most of the additions in the workforce are thought to have come from temporary and self-employed workers, while the amount of full-time jobs fell.
Hays' Australian division continued to be a weak point. Fees fell 13 percent due to a slowdown in activity in its lucrative resources and mining sector. The German division, its largest in continental Europe, continued to outperform, with fees rising 19 percent, while fees in France were flat.
Hays shares, which have risen more than 56 percent since January 2012, were up 0.4 percent at 96.4 pence at 1057 GMT.
($1 = 0.6608 British pounds)
(Reporting by Clare Hutchison and Sarah Young; Editing by Sophie Walker)