By Sinchita Mitra

Continued hiring caution and declining demand in the U.S. and life sciences sector dented SThree's half-year net fees from permanent hires, although strong demand for contract workers sustained the British recruiter's overall growth.

Still-high inflation has pushed companies to cut jobs, freeze hiring, and to favour temporary over permanent roles in their bid to minimise costs. Rivals PageGroup and Robert Walters have also flagged slower hiring.

"I think it's fair to assume... that the remaining two quarters of the year will be in decline year on year, but to a lesser extent than we witnessed in (the second quarter)," SThree Chief Financial Officer Andrew Beach said.

SThree, which hires employees for the finance, energy, banking, pharmaceutical, engineering and tech sectors, has felt the pinch particularly in the U.S. where scores of companies, especially in the tech industry, have trimmed their workforce.

London-listed SThree said net fees in the U.S. dropped 4.4% on a reported basis for the half year to May 31. Net fees in its permanent job roles unit fell 16.3% to 38.6 million pounds ($49.3 million), after a 21% drop in the life sciences sector.

"As a result of the life science sector currently spending very little on new R&D, etc, it's the U.S. market for us that is suffering," Beach added.

However, the company's overall net fees stood at 208.6 million pounds, compared with 203.1 million pounds last year, supported by demand for contract employees.

The company reported an 8% rise to 170 million pounds in fees in its contract roles division, which has historically been its biggest.

That still brought no cheer to SThree shares on Tuesday, which had fallen as much as 0.7% to 364.5p by 1001 GMT.

($1 = 0.7824 pounds)

(Reporting by Sinchita Mitra in Bengaluru; Editing by Sherry Jacob-Phillips and Jan Harvey)