Good morning, everyone, welcom e to SThree's half year trading update for FY 2023, thanks for joining us today. I'm here, as usual, with our CFO, Andrew Beach, who will take us through the numbers in a moment. As you know, we will give a brief overview of our performance before taking any questions. We have delivered a resilient performance in the first half of FY 2023, with net fees down 2% on a constant currency basis against a strong post-COVID peak performance in H1 of FY 2022, at the backdrop of the macroeconomic conditions that have particularly impacted global perm markets . It is worth noting that with the benefit of FX tailwinds on a reported basis, our net fees grew by 3%. Underpinning our performance was our contractor order book, which continues to be a source of strength for the business.
Contract now represents 81% of the group net fees. Our contract business grew 3%, driven by robust extensions as clients strive to retain the highly sought-after skills they require. This growth was offset by new placement activities following continued macroeconomic uncertainty. We are delighted with the strategic progress we continue to make, centered on our analytical and fact-based approach of knowing where to play and playing where we can win. Our highly disciplined and targeted investment in contract talent remains a priority, as we see flexible ways of working a long-term trend within global labor markets. With our Technology Improvement Programme, we are building something really exciting at SThree in terms of our overall proposition.
As we covered in January during our second investor briefing, the program will enable and excite our people to perform at their best, and it is something that will clearly differentiate us from our peers. By systemizing our best practices and specialist knowledge learned over decades of deep industry experience and implemented through state-of-the-art technology, we will fundamentally redesign our recruitment processes. With our ECM model, which has continued to grow in H1, comes a degree of complexity and a compliance burden. As automation is key to addressing these compliance complexities, we are future-proofing our business, which will enable us to operate effectively at a far greater scale and will position the Group at the forefront of the industry. From an operating platform perspective, the Technology Improvement Programme supports our strategic pillars by enabling data-driven decision making and informing resource allocation.
I'm pleased to say the program is progressing on track and on budget with a planned sequenced rollout across the group, starting with our U.S. and German businesses, set for later in 2023, as previously announced. These improvements will position the group to grow with sustainably higher margins over the mid to long term and provide the business with the right support structure to scale, with greater operational excellence, productivity, and customer and employee experience. Overall, we believe we are uniquely positioned to win in a changing world, with global megatrends supporting long-term growth drivers. We remain well positioned to source and place the best STEM talent the world needs, and we'll be in a position of strength to capitalize when confidence returns to the market. With that, I will now hand over to Andy, who will take us through the numbers. Andy, over to you.
Thanks, Timo. Good morning, everyone. The first half of the year has started with a resilient performance, considering the macro backdrop, with group net fees down 2% on a constant currency basis. This performance includes the impact of our recently restructured markets: Ireland, Singapore and Hong Kong. Excluding these, our net fees would have been down only 1%. While Q2 net fees were down 7% year-on-year, we did see some improvement on this in the final month of that quarter, and as we've entered Q3. We'll be able to give further detail on this with our interims at the end of July.
Most notable during the first half has been the impact of reduced expenditure in the global life sciences sector, which accounts for around 20% of our business, and without which, our net fees for the period would have been up 4% on a constant currency basis. Notwithstanding this sector impact on our performance, we are pleased to report that our contract net fees were up 3%, with growth continuing across most of our regions. In line with our strategy, contract now represents 81% of group net fees. Permanent net fees saw a decline of 19%. This reflects market conditions across all our regions, particularly in life sciences, as well as targeting investment towards contract in several markets. Let's take a look at what's driving our performance in the first half, starting with the regional perspective. DACH net fees remained flat year- on- year.
Germany, our largest country in the region, saw net fees decline 1%, driven by life sciences due to market conditions across that sector, partly offset by increases in both technology, with continued demand for roles within cybersecurity and software development, and engineering, with demand for construction roles. In the Netherlands region, net fees were up 5%. The Netherlands itself, our largest country in the region, delivered an increase of 3%, driven by technology with increased demand for project managers, ERP consultants and data-related roles, and engineering, due to demand for process engineers, electrical engineers, and health and safety advisors. Spain, although currently a small part of the group, saw strong growth of 63%. Rest of Europe net fees were down 2%.
The U.K., our largest country in the region, saw net fees remain flat, with growth in engineering offset by declines in both technology and life sciences. In the U.S., where we have the highest exposure to life sciences, we saw net fees decline by 11%. Contract net fees, which account for 86% of total net fees in the region, were down 2%, driven by life sciences, and this was partly offset by engineering, which was up 23%, with increased demand for roles within project management and electrical engineering. Our U.S. perm business, which represents 14% of net fees, declined by 43%, which resulted from a combination of our strategic shift towards contract in the U.S. from Q2 last year, together with softer trading conditions in line with market trends.
Finally, in the Middle East and Asia, net fees for the region were up 6%. Japan, which represents 43% of the region's net fees, saw growth of 2%, driven by engineering, as demand increased for roles within renewable energy. The Middle East is managed from our office in UAE and had a strong first half of the year, with net fees growing 46%, also driven by engineering. From a skills perspective, technology, our largest discipline, grew by 1% year-on-year. As a reminder, when we talk about technology, we're referring to placing people with skills in technology across multiple industries. Engineering grew by 17%, with continued strong demand from the energy sector, including renewables, which grew 29% year-on-year. Life sciences declined 21%, primarily driven by the global market conditions in that sector.
Average headcount for the first half was up 5% year-over-year, with contract headcount up 9% and permanent down 10%, in line with our strategic focus on the contract markets. Period-end headcount declined by 9% from the end of FY 2022. This includes reductions related to the restructure of our Singapore, Hong Kong, and Ireland business, and on a like-for-like basis, excluding these countries, our period-end headcount declined by 7%. In line with our strategy, while closely monitoring and taking the evolving market conditions into account, we are maintaining our disciplined and focused headcount investment towards contract in the markets and skill verticals that provide the best growth opportunities and where we can generate the strongest returns. As expected and previously guided, we've seen productivity levels normalize from the exceptional levels experienced in H1 FY 2022.
H1 productivity was down 7% year- on- year, that remains more than 25% above the comparative pre-pandemic levels. The contractor order book is flat year- on- year, which, together with the net fees already recognized in H1, gives good visibility of over 70% of the full year consensus net fees. Finally, we have a strong balance sheet with net cash of GBP 72 million at the end of the first year. With that, I'll hand back to Timo.
Thanks, Andy. As you have heard, the first half has seen a robust net fee performance driven by our contract business. Our teams have continued to execute well, and we have made good progress against our clear strategy. Our long-term opportunity is unchanged, underpinned by flexible talent and the structural megatrends which drives the acute need for scarce STEM talent. In the short term, we remain responsive to the macro backdrop and how that plays out on the mix of new placements and extensions while tightly managing costs. With our targeted investments in talent and the Technology Improvement Program on track, we are rigorously focused on ensuring we build the right platform and the right structure to capture the opportunity for long-term sustainable growth. Supported by a resilient business model and a strong financial position, we remain well positioned to source and place the best STEM talent the world needs.
Thanks to all of you for joining us this morning, and as a reminder, we will be issuing our interim results on the 25th of July. Thank you very much, and speak soon.