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Fears of a recruitment market slowdown grew on Thursday when SThree warned it expected a sharp drop in profits next year, sending shares in the specialist recruiter and other London-listed headhunters tumbling.
SThree, which places science, technology, engineering and maths workers, said it expected pre-tax profits of around £25m next year, well below analysts’ estimates of £66.6m. Analysts expect the group to announce profits of £67.4m for the year ending November 30, 2024.
SThree’s warning comes after a brutal period for recruiters, who have suffered as international companies have cut jobs or delayed hiring decisions amid broader geopolitical uncertainty and difficult economic conditions.
SThree shares fell as much as 36 per cent in early trading in London to around £2.31, the lowest level since 2020, and were down 24 per cent by mid-morning. The negative update hurt shares of other recruiters, sending Hays shares down 5 percent and causing PageGroup shares to fall 3 percent.
SThree, which places workers in countries across Europe, the Netherlands, the US and the UK, said net fees had fallen 9 per cent over the year to November 30, to £369m , with a reduction in rates for permanent recruitment by almost a fifth and for contract recruitment by 7. percent.
He said increased “political and macroeconomic uncertainty”, particularly in Europe, had resulted in weak business activity as companies delayed decision-making.
CEO Timo Lehne said the “anticipated easing of market conditions [had] has yet to materialise, adding that the company had taken a “cautious view” of its 2025 financial year as a result.
The warning comes as UK businesses face rising costs as a result of higher employer contributions to national insurance announced in Chancellor Rachel Reeves’ budget in October.
On Tuesday, job site Indeed said hiring in the UK had fell more sharply than in other major economies over the past year, with advertised vacancies 13 percent lower than their pre-pandemic level and 23 percent lower than a year ago. This is a larger reduction than any of the other markets it covers, including the United States, France, Germany, Canada and Australia.
According to Indeed, the current hiring decline has been deepest and longest in technology, software development and information design, a trend that is likely to hurt Stem-focused recruiters like SThree.