Michael Page shares plunged on Monday after the white-collar recruiter said financial services hiring in Britain had stalled in the past three weeks amidst a wave of job cuts by its banking clients. “It’s been two to three weeks of turmoil that has slowed down hiring,” said Steve Ingham, chief executive of Michael Page International, which includes law firms, accountants and banks among its customers. “I’m not sure we should be panicking. But there’s clearly some concern over whether this is a short-term blip around job cuts in the banking sector or a wider issue in the economy.”
Eight banks including Royal Bank of Scotland, Barclays , UBS and HSBC have announced thousands of job cuts in the past month as they seek to reshape their businesses in the face of a slump in investment banking profits.
Mr Ingham said the redundancy announcements by some of the group’s biggest clients were causing “anxiety”. But with shares plummeting 18 per cent in early morning trading he sought to allay fears about the strength of its banking business, which accounts for just 10 per cent of group gross profits. “Clearly banks have to be seen to be doing the right thing,” he said. “But they will still hire in areas where they need key skills. We’re not seeing job freezes in other parts of the economy though the austerity measures and the troubles in the European economies are all cause for concern.”
The shares fell 8 per cent at 368.6p, compounding a 36 per cent fall in the share price since the start of the year. Pre-tax profit, excluding £28.4m of exceptional gains in the previous year, rose 38 per cent to £45.5m in the first six months to June 30 on group gross profit of £275.1m, missing analysts’ forecasts by about 12 per cent.
Finance and accounting were hiring bright spots last year and the comments provoked fears that the recruitment sector was braced for a fresh bout of turmoil after industry-wide revenues were savaged during the recession.
But Michael Page said that although the UK market remained challenging it expected growth in its European, Asian and Latin America businesses where the market for recruitment agencies is less saturated.
The group, which has offices in 32 countries, earns 76 per cent of gross profit outside the UK and has opened in Qatar, Malaysia and India in the past six months while expanding its operations in China and Hong Kong.
In a note Paul Jones, analyst at Panmure, said: “Investment in new offices and increased headcount remains ongoing, which suggests significant underlying confidence in further progress in a number of markets.
“However, a recent hiring freeze in banking is likely to take the edge off second half growth and UK trading remains challenging. We move the target price from 515p to 458p to reflect this, though after recent market moves this makes the shares a buy rather than a hold.”