(Reuters) - Hays Plc (HAYS.L) is seeing increasing signs of weakening business confidence in Germany and Britain, the recruiter said on Thursday, sending its shares down as much as 5% despite posting higher annual net fees.
CEO Alistair Cox lamented the uncertainty surrounding Britain’s plans to exit the European Union, which has slowed investment, but remained optimistic about weathering the shakeout.
“Businesses (in the UK) have been waiting to have some certainty as to the outcome of the whole Brexit process,” Cox told Reuters. “What businesses find difficult to deal with is a complete lack of certainty.”
“We survived the global financial crisis back in 2008-09... businesses came through it,” Cox added.
“Fee growth in the UK was understandably more subdued in the fourth quarter and was impacted by increased economic uncertainty, which reduced client confidence,” Hays said, adding that conditions in Britain were now “tougher”, with “increasing signs” of reduced business confidence.
Risks related to Brexit include Britain potentially leaving the EU without a deal.
British Prime Minister Boris Johnson on Wednesday announced plans to suspend parliament for more than a month ahead of an Oct. 31 deadline to take Britain out of the EU which he said he aimed to do with or without a deal.
Hays also warned of a likely impact from weakness in Germany, its largest market which accounted for nearly 26% of its total fees.
Hays shares fell as much as 5% but had pared losses to stand down 2.2% at 136 pence at 0952 GMT.
“In Germany, economic conditions and market activity levels are weakening, with reduced business confidence and slower client investment decisions, particularly in the engineering and automotive sectors,” the company said.
German business sentiment deteriorated more than expected in August to hit its lowest in nearly seven years, a survey showed this week, in a sign that trade disputes are pushing Europe’s largest economy toward recession.
German manufacturers - whose exports have been a bedrock of the country’s economic strength - are now struggling with weaker foreign demand, tariff disputes and business uncertainty linked to Brexit.
Annual pretax profit of Hays, which is largely focused on hiring for white collar roles, fell 3%, mainly due to the costs of restructuring its operations in Europe.
It posted a 5% rise in annual net fees to 1.13 billion pounds ($1.39 billion) as fees in Germany, UK and Ireland grew.
Reporting by Justin George Varghese and Samantha Machado in Bengaluru; editing by Arun Koyyur and Jason Neely