The UK Recruitment Index 2019 shows that UK recruitment firms continue to experience good candidate growth both in the UK and internationally. However, with the uncertainty of Brexit looming large, expansion plans and M&A activity have started to slow down.
Margins remain stable
Margins have remained resilient during this period of uncertainty: over 70% of respondents achieved gross margins on contract/temporary roles of 11%-20%, with the average across all firms being 17.5%.
For contingent placements, the highest average percentage of salary achieved was in utilities and energy at 27%, followed by media & marketing and accounting & finance, both at 23%. For executive search, the average fee percentage of salary remains strong in utilities and energy (36%), banking and insurance (27%) and media (36%).
Attrition rates remain high
Respondents saw average attrition rates of 20% and above, with the largest firms (net fee income (NFI) of £10 million to £100 million) seeing rates as high as 33%. The figures do not improve when looking at the rates for staff leaving within 12 months: the average rate across all firms is now over 20%, with the largest firms at 34% attrition.
With the fight for talent becoming more and more competitive, the need to keep good people is imperative.
The need to develop and retain existing headcount is apparent across all business sectors and we have seen at recent APSCo Awards, and through general discussion across the sector, a step up in the development programmes and initiatives being offered. More firms are hiring people to specifically look after this area.
Over the last couple of years, agile and flexible working have become more popular, which is a reflection of today’s working generation and the requirement to keep staff engaged and motivated.
Gender diversity remains an issue
Among respondents, we found that the highest number of women was at the recruiter level (41%). This percentage reduced dramatically at leadership level (35%) and board level (25%). Further analysis showed that 25% of firms’ boards are predominantly male – with less than 10% female representation. Only 31% of companies have initiatives in place to retain women.
Opportunities still exist
The recruitment firms that participated in the survey still consider upskilling of employees as their major barrier to growth, whilst Brexit and cash flow are high up on the list.
The need to develop and upskill staff will continue to play a major role in the success and value of UK recruitment firms in the longer-term.
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.
A change in focus for short-term strategy
All the firms that participated in the survey confirmed that organic growth through headcount and new geographies are the main areas of focus over the coming year. Only 41% were interested in a merger or acquisition over the next 12 months.
With the impending conclusion to Brexit, and the general slowdown in the UK economy, UK recruitment companies are thinking twice about their strategy for growth. The survey suggests that recruiters are going back to their roots, focusing on organic growth through increased headcount and initiating cultural changes to get their business ready for the future a the post-Brexit environment.