Suhail Mirza discusses the performance of the UK listed recruiters over the past two months, highlighting both the positive and negative trends being seen in the economy.
The past two months have seen significant sell-offs across the world’s capital markets and this skittish investor appetite has not left the UK listed recruitment sector unaffected. The FTSE 100, for example, has dived 8.9 per cent from the close of markets from 28th August to close on 26th October moving from 7617 to 6936. It is not alone as the S&P 500 has dipped into correction territory with US stocks in general heading for their worst month since the global financial crisis. The NASDAQ index (heavy with technology stocks) has recorded its biggest one-day decline in more than seven years.
Almost without exception, the largest UK listed recruitment businesses have seen significant losses of value. Hays (with a market cap of £2.28 billion) has seen its price drop almost 20 per cent from 195p to 156p over the 28th August to 26th October period. Robert Walters (market cap of £460 million) has seen its share price fall over 20 per cent from 764p to 610p. SThree (market cap of £409 million) has fared relatively well in comparison although its shareholders have seen a drop in value of 10.6 per cent from 350p to 313p.
Page Group (market cap £1.63 billion) has suffered too, with a drop in share price from 607p to 493p, a decline of 17.9 per cent. This despite reporting, in early October, that it anticipates being at expectations for full year profits. Its GP in the third quarter as a whole grew by 20 per cent to £207.7 million although its UK division barely grew at all (recording a 0.8 per cent gross profit growth) due to “Brexit and political uncertainty.”
A number of the other major listed recruiters have also faced the brunt of the market falls. Gattaca (market cap of £33 million) has declined by over 30 per cent from 148p to 103p and Staffline (market cap of £335 million) has seen its share price fall by 2.9 per cent from 1236p to 1200p. Impellam (market cap of £294 million) and Harvey Nash (market cap of £96 million) managed to de facto tread water with share prices closing on 26th October fractionally higher than their respective 28th August closing figures.
On the broad economic front, there has been some encouraging news for workers in the UK. Figures show that, excluding bonuses, their wages grew by 3.1 per cent in the three months to August. This is the fastest pace of growth since the global financial crisis. Noteworthy too is the fact that the annual inflation rate dropped to 2.4 per cent in September from its 2.7 per cent figure in August. This increase in real wages may augur well for consumer spending moving forward.
The backdrop to the challenges facing the UK capital market and also the listed recruiters of course remains the ever more desperate uncertainty and political party games that members of the Tory Party remain determined to engage in over the Brexit issue. In what seems a Parliamentary effort to enact their own version of the “Game of Thrones” saga, the Palace of Westminster remains rife with talk of efforts of prominent Tory Brexiteers determined to oust Theresa May for failing to deliver a “hard” enough Brexit deal with Europe.
Few can envy the Chancellor, Phillip Hammond, as he prepared to deliver the Budget on 29th October. Whilst he remains keen to reduce the ratio of public debt to GDP (currently standing at 85 per cent) the Prime Minister has announced the end to “austerity”, a policy whose devastation on the social capital of the country future generations will surely find as incomprehensible as the paucity of the economic arguments supporting it.
The Chancellor has some positive proximate economic data as he writes his speech. The latest data puts nominal GDP growth at four per cent (beating expectations) and also reveals that the Government borrowed £18 billion between April and August, which puts it back on track to borrow £10 billion less during the fiscal year than forecast by the Office of Budget Responsibility. His challenge remains to cast his economic net in such a way (corporation tax cuts have been intimated) as to anticipate the extent of the impact on trade and UK plc of the Brexit deal that may (eventually) be struck. One does not envy his task.
Orginally published in Recruitment International.