Hays has reported a 7% drop in its like-for-like (LFL) net fee performance on its permanent appointments, driven by a 12% decline in volumes, signalling a continued weakness in the job market.

The FTSE 250 recruitment firm reported that across the group, group net fees dropped by 3%, with temporary and contracted contract growth falling by 1% year-on-year in the first quarter.

The update comes as the firm’s Momentum strategy resulted in the twelfth consecutive positive quarter of consultant net fee productivity growth, rising by 8%. Hays said this was underpinned by a 4% increase in average candidate salary, along with investments in technology and people.

Furthermore, the firm stated that it had made progress in exploring strategic options relating o Belgium, Brazil, Greater China, Malaysia, the Netherlands, Singapore and the UAE, and is in advanced discussions for several of these businesses.

CEO at Hays, Mark Dearnley, said: "Our recently introduced Momentum strategy addresses the future hiring needs of our clients, sharpens our focus and captures the benefits associated with market leadership. There is real energy across the group, and I would like to thank our colleagues for their positive engagement and rapid execution.

"In line with our expectations, the decline in group net fees eased to 3% in Q1 driven by good Temp & Contracting growth in several of our countries. Perm activity remains mixed, with sustained strong growth in North America but ongoing fragility in Northern Europe."

Hays stated that it has made good progress with its initiatives to deliver further structural cost savings of £50m per annum in FY27. It has achieved £10m in Q1, and in total, has delivered £125m per annum of structural savings since the start of FY24.

In its trading outlook, the recruitment firm said its September net fee growth rate was –2%, and it expects stable market conditions in the near future, with greater resilience in temp and contracting than in its permanent division.

It added that it continues to “relentlessly focus” on its structural cost and productivity initiatives, supported by investments in its digital platforms.

Following the update, shares in Hays dropped by over 9%.

Investment director at AJ Bell, Russ Mould, said that the update "implies the jobs market is as tough as ever", suggesting that companies lack confidence and do not want to invest in their businesses for growth.

He concluded: "The exception is in North America where Hays is seeing growth in placing staff into permanent positions. Economic resilience certainly helps in that part of the world. There are pockets of positivity elsewhere, including Portugal and Spain which are proving to be lucrative regions for Hays.

"Investors are disappointed with the latest update as it is clear life is hard for recruitment agencies. While Hays has put a positive spin on the period, the numbers speak for themselves. First quarter like-for-like net fees are down across its key regions, with only its ‘rest of world’ operations avoiding losses and even that division was flat year-on-year.

"Hays has been through enough up and down cycles to know that the key to survival is to adapt to changing market conditions. That’s not simply just cutting back on recruitment consultants when times are harder. It also means pivoting to more vibrant regions and being more selective in the types of roles, such as its current strategy to target higher salary positions on the permanent side."

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