Reed Health Group has shocked investors with a warning that NHS cost-cutting has hit its profits.

A statement to the stock exchange warned half-year profits would drop from £4.8m to £2.9m – prompting its shares to slide to by 23p to 80p each.

Tough compliance requirements from the NHS’s Purchasing and Supply Agency (NHS PASA) have meant Reed has had to withdraw some nurses, leading to a subsequent drop in income.

NHS Professionals, the in-house agency that undercuts private firms, has also hit Reed’s profits, along with a drive to recruit nurses permanently for the health service.

The statement added that the company’s results for the full year ending in June would also suffer.