The recruitment firm Hays has warned that UK employers are still hesitant to hire staff after Labour’s election win, as the company reported a more than 90% plunge in annual profits.

It said it had experienced “increasingly challenging market conditions” throughout the 12 months to June, due to caution among businesses and workers considering job moves.

Fees and profitability were “significantly impacted” by low confidence among its customers, with the recruiter saying activity had slowed in countries such as the UK and France, where looming general elections had spooked clients.

Profits for the UK and Ireland division alone were down 78% in the year to June, in part because of “decreased client and candidate confidence” in the lead-up to the July national poll in Britain.

But Hays said demand for its recruiting and consultancy services had failed to rebound even after Labour confidently secured a majority in last month’s election. “Activity levels have been relatively subdued since the general election and conditions remain challenging,” the company said.

It is unclear whether Labour’s workers’ rights package has caused any hesitancy among employers, though businesses groups have come out in recent weeks to urge caution over proposals that include clamping down on zero-hours contracts and ending “fire and rehire” practices. Labour also wants to encourage collective bargaining by giving unions easier access to workplaces, and is expected to introduce a new duty on employers to inform workers of their right to join a union.

Overall, tough conditions for Hays, which operates in 33 countries, contributed to a 92% drop in annual pre-tax profits to £14.7m for the year to June, down from £192m a year earlier.

That drop included costs linked to an ongoing restructuring programme, and a drop in the value of assets in the US. Without those so-called exceptional items, Hays suffered a 50% drop in group profits to £95m.

“We saw increasingly challenging market conditions through FY24 … with low confidence levels and longer-than-normal ‘time-to-hire’, and our profitability was significantly impacted, including our three largest markets of Germany, Australia and the UK,” its chief executive, Dirk Hahn, said.

“Against this backdrop, we have focused on enhanced operational rigour, driving consultant productivity and strong cost management, and are determined to build a more resilient Hays.”