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Staffing firm Adecco feels chill on hiring from economic slowdown

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By Reuters
Staffing firm Adecco feels chill on hiring from economic slowdown
FILE PHOTO: The logo of Swiss Adecco Group is seen at its headquarters in Zurich, Switzerland October 30, 2018. REUTERS/Arnd Wiegmann -/File Photo   -   Copyright  Arnd Wiegmann(Reuters)

By John Revill

ZURICH (Reuters) – Uncertainty caused by the U.S.-China trade war, a weakening automotive sector and Britain’s exit from the European Union has caused companies to cut spending on hiring staff, Adecco Group <ADEN.S> said, as it reported a drop in third-quarter revenue.

Adecco, which vies with the Netherlands’ Randstad <RAND.AS> as the world’s largest staffing company, said its revenue fell 4% in the three months to the end of September when adjusted for currencies and trading days.

“When you look at our figures, you can say this economic uncertainty is here and definitely still present,” Chief Executive Alain Dehaze told Reuters on Tuesday.

“Nothing has been solved. The trade war is not solved, Brexit is not solved. There is still a lot of political instabilities in many countries: Latin America in Chile, the U.S., Hong Kong.”

The fortunes of staffing companies are closely watched as barometers of broader economic development. Employers tend to hold back on taking on extra staff when they worry economic growth will slide and orders fall.

Rivals Randstad and ManpowerGroup <MAN.N> have also been hit by reduced hiring by customers operating in cooling economies.

Factory activity across the euro zone contracted sharply in October, as manufacturing in Germany remained mired in recession.

Still, the downward trend was not worsening, Dehaze said.

“When you look at September and October there is a kind of stabilisation at -4%; there has been no further deceleration,” he said.

The temporary staffing market in Britain was largely stable, Dehaze said, because companies were hiring temporary staff as they worked out how Britain’s messy departure from the EU would affect them.

But permanent hiring had been hit because employers have “no clue” how Brexit will develop, Dehaze said.

Demand for permanent IT staff in Britain had particularly slackened, Dehaze said, indicating problems in the financial services sector which traditionally hires lots of IT professionals.

Zurich-based Adecco’s third-quarter group revenue fell by a reported 2% to 5.89 billion euros (£5.09 billion), just missing expectations, according to Refinitiv data.

The downturn was in line with negative markets, while the company could benefit from productivity savings when market conditions stabilise, said Vontobel analyst Michael Foeth.

The stock was 1.2% lower after paring early losses of 2.7%.

Net profit fell to 179 million euros, beating analyst forecasts for 169 million euros. The 34% drop reflected a tough comparison with the 110 million euro gain it made last year from selling its Beeline software staffing company.

Adecco said it was selling its U.S. healthcare staffing business Soliant Health for 551 million euros to private equity firm Olympus Partners.

(Reporting by John Revill; Editing by Michael Shields and Louise Heavens)