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Adecco sees Brexit adding to European hiring woes

Zurich

BRITAIN'S messy and prolonged divorce from the European Union (EU) 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 said on Thursday.

Brexit is adding to problems caused by the escalating US-China trade war and Europe's flatlining manufacturing sector, where the automotive industry is struggling, chief executive Alain Dehaze said.

"It is really affecting the mood - it is reflected in temporary staffing and permanent recruitment which are down," he 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, Mr Dehaze said.

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"The mood is shifting and becoming more downbeat. We need clarity so companies can start to act and implement their strategies," he added.

Swiss-based Adecco said last year that financial companies in London were holding off hiring financial staff in the city 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, 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 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 as the world's largest staffing provider, reported a 3 per cent fall in revenue for its second quarter, a worsening trend from the start of the year when its revenue shrank 2 per cent.

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 and BMW also weighed on Adecco's European business.

"The major concern is coming from Europe, that is where you see the real deceleration," Mr Dehaze said.

"There is a lot of uncertainty, there is Brexit (and) the trade war which have 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 per cent drop in underlying earnings and a 1.7 per cent fall in revenue, citing the European downturn, particularly among German carmakers.

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," Mr 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." Mr Dehaze also expected weakness in Germany - where its sales fell 15 per cent - to continue. Still, employers in the US and Asia remained confident, he said, while Adecco continued to reduce costs. REUTERS