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2008 / 09 – a challenging time for the recruitment industry - Western Mail commentary by Matt Southall
Matt Southall, Managing Director of Acorn, one of the UK's leading recruitment agencies explains how the sector is adapting to the challenging market conditions.
The recruitment industry has had to adapt to a dramatically changing set of circumstances in 2008 and will continue to do so for some time to come. Turnover in the UK is expected to be down to around £26.3 billion in 2008 and perhaps even lower than £25 billion next year, which will represent a significant drop from its high point in 2007.
It is tough for everyone in the industry; agencies have been reviewing their own operating costs, with some shedding staff and closing branches as orders slowed dramatically at the start of the second half of the year. One large agency was reported to be making up to 400 redundancies, other national agencies have closed some of their branches in Wales and a large number of independent agencies, which can no longer rely on the commitment and consideration of their banks, increasingly looking for merger or opt-out opportunities as their margins and profitability tighten severely.
At Acorn, this year will see us achieve our highest turnover ever, but not at the levels of our original forecast. Additionally, our margins have been hit hard, and like most industries there is a general tightening-up of procedures for obtaining debtors insurance cover, creating new levels of risk management and less related flexibility - all in all, making contract negations with clients ever more complex.
However, Acorn remains in a good position; with a positive outlook on the year ahead and with good management of costs, we’re hopeful that the current economic conditions throw up new opportunities for growth either by acquisition or by the extension of the portfolio of services we’re able to offer our clients. Thanks to the close relationships we’ve built with many employers, we are well-placed to advise them at a time like this, whether for staffing supply or in an advisory capacity in areas such as outplacement, staff development and so on.
The better agencies are already looking inwardly to see what areas of their service can be improved to provide added value to their clients, as well as searching for new areas of consolidation, cross-selling and support that they can offer them.
And across most general areas of employment, candidate traffic has increased (and looks set to continue), with more volume on-line. As a result advertising costs has been cut and agencies are able to respond even more swiftly and cost-effectively for their client companies. It seems only yesterday that our main issue in recruitment was one of staff shortage; this has reversed incredibly quickly, with an increasing abundance of staff being made available to the market.
Additionally there are some sectors of recruitment, which continue to grow. IT, in which Acorn plays a major role, remains very buoyant and will do well in 2009. So too will several technical sectors. Recruitment in oil and gas boomed in 2008 and digital marketing has also grown rapidly with the scarce and specialist nature of skill sets resulting in the extensive approach required to sourcing the right candidates.
Environmental and sustainability consultancy has also developed as a niche sector thanks in part to legislative and social pressures. This has led to a significant demand for qualified and experienced candidates, though it has been overlooked by many recruitment agencies. And activity for on-site contract management, worth an estimated £1.5 billion, is still widely expected to grow in 2009 albeit operating at much tighter margins.
A particularly positive and fundamental development during 2008 has been the increased activity (and publicity) of the Gang Licensing Authority. We’ve seen several instances of agencies’ licenses being revoked as the GLA clamps down on rogues. With the welfare of workers foremost in our minds, this tough approach has been welcomed by agencies and employers throughout the UK and we look forward to it continuing in 2009.
Less certainty surrounds the impact of new legislation from the EU, which will give temporary workers the same rights as permanent workers after 12 weeks. The recruitment industry and employers alike are still unsure as to how the consequences of this will be realised; will it lead to less flexibility for UK employers, making them less competitive and ultimately lead to fewer temporary work opportunities?
Overall, the recruitment industry will use these difficult times to consolidate, to restructure itself and to focus on service and value even more. Reputable agencies will be in a good position to respond to the economic up-lift when it comes, having proved their worth in a slower market and being sharper, leaner and offering a greater portfolio of services than ever before.
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