UK Recruitment Index 2019 shows margins remain strong

6 Nov 2019

Electronic stock market

The UK Recruitment Index 2019 has been published, revealing a picture of a sector that remains strong, despite Brexit turmoil, but is facing its own talent crisis.

  • 17.5% is average margin for contract/temporary placements
  • Average attrition sits at 20%
  • 80% say upskilling employees is major barrier to growth
  • 55% rely on EU contractors

Margins across the recruitment profession remain strong, but staff attrition and a need to upskill teams remain key challenges along with Brexit. That is according to the 2019 Recruitment Index compiled by Saffery Champness LLP in association with Association of Professional Staffing Companies (APSCo) and supported by The Employment Agency Movement (TEAM).

Margins remain strong

Gross margins for contract/temporary averaged 17.5% across all respondents although some sectors were performing significantly better. For contingent permanent placements, utilities & energy generated the highest average fee as a percentage of salary at 27%. This was followed by 23% for both media & marketing and accounting & finance.

Brexit impact

The report also indicates that over half of those surveyed (55%) said they were either partially or highly reliant on EU contractors, indicating that Brexit could be a threat to many businesses over the coming months and years.

When quizzed on future growth strategy, a desire to move into new geographies was evident, with Germany and the Netherlands favoured European destinations for UK recruitment firms (identified by 29% and 12% respectively). The USA still remains a strong pull for recruiters with over 20% either having opened offices or exploring the region.

Talent challenges

While Brexit and associated economic uncertainly was cited as a barrier to growth by 60% of those surveyed, the top hurdle to business advancement was the need to upskill employees, which was identified by 80% of respondents.

In addition, those surveyed saw average staff attrition rates of 20% and above within their own businesses, with firms with an NFI over £10m seeing rates as high as 33%. This may explain why increasing headcount remains the number one priority for firms, with 87% seeing this as their best way of achieving growth.

Gender diversity

Among respondents, the highest number of women was at the recruiter level (41%). However, this percentage reduced significantly at leadership level (35%) and board level (25%). Further analysis showed that 47% of firms’ have fewer than 10% female representation at board level. This gender disparity is no doubt linked to wider talent challenges across the sector. However, just 31% of companies have initiatives in place to retain women, with 23% of respondents offering flexible working and 9% providing enhanced maternity benefits.

Jamie Cassell, Partner at Saffery Champness, said:

“It is encouraging to see that margins remain resilient during this period of uncertainty, particularly within sectors where skills demand is shifting in line with technological advancement, such as IT and media & marketing. However, this is no accident. There is little doubt that businesses are building strategies in response to external forces and taking conscious steps to mitigate against risk. For example, the old stomping grounds of the Middle East and APAC are no longer the first ports of call when firms are considering overseas expansion, with Germany and the USA becoming increasingly popular.”

Commenting on the findings, Ann Swain, Chief Executive of APSCo, said:

“Our market is currently facing unpresented challenges. However, today’s rapidly shifting landscape is also presenting ambitious firms with exciting opportunities and our results indicate a profession which is robust, agile and evolving.”

“While Brexit continues to dominate headlines, it is interesting that the need to upskill employees is seen as the number one challenge for recruitment leaders, with economic uncertainty due to the UK’s withdrawal from Europe coming in second.”

“It is ironic that our profession, which is on the front line in the scramble for top talent, seems to be battling its own staffing crisis. The lack of gender diversity across the profession, particularly at senior level, remains a key obstacle which must be addressed urgently. This data suggests that talented females are either being lost to other professions, or simply not offered the opportunity to climb the career ladder and fulfil their full potential. In these turbulent times, those firms which can not only attract – but also retain and develop their own top talent – will thrive and prosper.”