By John Revill
ZURICH (Reuters) – Britain’s messy and prolonged divorce from the European Union is weighing on hiring sentiment in the country due to uncertainty about whether it will leave the bloc with a deal, temporary staffing company Adecco Group <ADEN.S> said on Thursday.
Brexit is adding to problems caused by the escalating U.S.-China trade war and Europe’s flatlining manufacturing sector, where the automotive industry is struggling, Chief Executive Alain Dehaze said.
“It [Brexit] is really affecting the mood – it is reflected in temporary staffing and permanent recruitment which are down,” Dehaze told Reuters. “People have been expecting clarity for a long time, hopefully it will come.”
Some people were expecting a no-deal departure, while others thought a deal with the EU could be arranged, he said.
“The mood is shifting and becoming more downbeat. We need clarity so companies can start to act and implement their strategies,” Dehaze said.
Swiss-based Adecco said last year that financial companies in London were holding off hiring financial staff in London due to Brexit concerns.
British-based staffing companies have also recently highlighted jitters among employers about taking on both senior and shop floor workers.
Pagegroup Plc <PAGE.L>, which places candidates in permanent rather than temporary jobs, said in its half-year results on Wednesday that uncertainty surrounding Brexit continued to affect decision-making by clients and candidates at senior levels.
Meanwhile blue-collar temporary staffing company Staffline Plc <STAF.L> cut its profit outlook in May, saying companies were scrambling to transfer temporary workers to permanent employment status ahead of Brexit.
Adecco, which vies with Dutch-based Randstad <RAND.AS> as the world’s largest staffing provider, reported a 3% fall in revenue for its second quarter, a worsening trend from the start of the year when its revenue shrank 2%.
The slide continued at the same rate into July as the downturn in automotive and manufacturing sectors which has hit industrial companies such as Siemens <SIEGn.DE> and BMW [BMWG.DE] also weighed on Adecco’s European business.
“The major concern is coming from Europe, that is where you see the real deceleration,” Dehaze said.
“There is a lot of uncertainty, there is Brexit (and) the trade war which has impacted automotive in Germany which is also being affected by electrification.”
Staffing companies like Adecco are seen as proxies for the health of the broader economy, with companies taking on temporary staff at the beginning of a recovery and letting them go during a downturn.
Randstad last month reported a 4% drop in underlying earnings and a 1.7% fall in revenue, citing the European downturn, particularly among German automakers..
Adecco said recent data showed there was unlikely to be an improvement soon.
“If you look at the European manufacturing PMI we are still at 46.5. We don’t see positive forward-looking figures pointing to a strong rebound in the near term,” Dehaze said, referring to the European manufacturing purchasing managers’ index. A PMI reading below 50 signals business activity is shrinking.
“What will be very important is September, then we will see how companies will end the year. They look at their order books after the summer holiday and they know what they need to manufacture and service.”
Dehaze also expected weakness in Germany – where its sales fell 15% – to continue.
Still, employers in the United States and Asia remained confident, he said, while Adecco continued to reduce costs.
Quarterly revenue of 5.92 billion euros ($6.63 billion) met analyst expectations in a company-gathered consensus.
Net income fell 6% to 159 million euros, beating expectations for 144 million. It said it remained on track to deliver incremental productivity savings of 70 million euros in 2019.
Analysts hailed margin improvement, which increased by an underlying 20 basis points. The stock rose 1.5% in early trade.
“The sales trend was weak as expected, but Adecco scored with the margin development,” said Zuercher Kantonalbank analyst Marco Strittmatter.
(Reporting by John Revill; additional reporting Sangameswaran S in Bengalaru, Editing by Michael Shields/David Evans/Susan Fenton)