UK markets resilient in the face of political chaos
Our NED, Suhail Mirza, reflects on the performance of the UK’s listed recruiters over the past couple of months and considers what impact current events are having on the economy.
In danger of losing count of the number of Parliamentary defeats for Theresa May in her efforts to salvage a deal (and some dignity), we have now seen the formation of a breakaway party from Labour; the farce that is political “leadership” in the UK has, however, not dampened UK capital markets at the start of this year.
Share price trends positive
The FTSE100 has climbed over 7.5 per cent from its 2018 close of 6728 to 7236 at the close of markets on 15th February. Broadly, the larger listed recruiters in the UK have been bouncing back over in recent weeks too.
PageGroup, with a market cap of £1.52 billion, has effectively stood still this year (moving from 460p to 462.4p) but has climbed nine per cent above its 52-week low of 424.2p on 15th January. Hays (market cap £2.27 billion) has had a storming start to 2019 rising over 13 per cent from 140p to 158.5p. It is now some 17.7 per cent above its 52-week low of 134.6p of 27th December 2018.
Both SThree (market cap £406 million) and Gattaca (market cap £37 million) have also gotten off to vibrant starts this year; the former is up 6.8 per cent, moving from 286.5p to 306p and is now an impressive 24.9 per cent above its 52-week low, which it hit on 28th December. Gattaca, meanwhile, is 8.6 per cent up this year and some 20 per cent above its 52-week low of 95.8p of 20th November 2018.
Elsewhere, Robert Walters (market cap £412 million) and Impellam (market cap £274 million) have both drifted lower in share price (1.8 per cent and 3.8 per cent respectively) this year. In Robert Walters’ case, it is now almost 14 per cent above its 52-week low of 475p hit on 11th December 2018. Impellam has actually dropped by 15 per cent from a 52-week high (655p) reached on 20th August last year.
Empresaria has also seen a drift lower in share price albeit relatively minor (74p to 71.5p) this year, although it too has bounced back from a 52-week low of 64.25 on 23rd January; a rise of 11 per cent.
Economic confidence hits lows
Notwithstanding the febrile political atmosphere, there has been some positive economic news to bolster the prospect for UK recruiters. The ONS announced its labour market statistics on 19th February and this revealed the number of vacancies stood at 870,000 in the November 2018-January 2019 quarter; some 16,000 more than the previous quarter and 46,000 more than the previous year and the highest since comparable records commenced in 2001. The statistics also confirmed the unemployment rate at four per cent, the lowest for decades.
Yet investors will have placed these figures in the context of earlier data, which may portend poorly for the performance of the UK economy. On 8th February, for example, the latest KPMG and REC “UK Report on Jobs” revealed that permanent placements in the sector fell for the first time in over two years and that the vacancies growth has edged down to a 27-month low. The Report added that a sharper fall in candidate availability had led to a further increase in starting pay.
Indeed Neil Carberry, CEO at the REC, stated, “This is the first time since July 2016 where permanent placement numbers have dropped…” He added, however, that we must “...be careful not to overreact” given that employment rates “are high” and that labour market performance was “still strong”.
Perhaps most worryingly, in late January, the REC, in its “Jobs Outlook” Report, disclosed that new data had evidenced that employers’ confidence in the prospects for the UK economy was negative for the sixth successive month. The confidence prospects were also at their lowest since June 2016.
Broadening our perspective to look at the human cost of policy and politics of late it is disturbing to note, according to the Resolution Foundation’s “Living Standards Outlook” report published on 20th February, that there could be a record level of child poverty in the UK by the end of the current Parliament. This has been the product of a combination of anaemic economic growth and UK Government spending cuts. As the jockeying for power prestige and political points accelerates in the “Palace” of Westminster, perhaps a thought should be spared for the innocent who, as ever, are forced to suffer as they must.
This article was originally published in Recruitment International