UK Recruitment Index 2023
16 May 2023
Our Recruitment Index, produced in association with APSCo looks to give annual insight and useful benchmarks for firms to measure themselves against, now that we are finally past the worst effects of Covid-19.
There was of course a huge recruitment drive in 2021 in the UK and globally to meet the challenges of growth once Covid restrictions were eased. Many recruitment firms were reporting record-breaking figures during this period and 2022 began in the same vein. However, by Autumn last year, a gloomier economic outlook, due in part to soaring global inflation and political uncertainty, put the brakes on hiring and recruiters started to feel the pinch, particularly in the fiercely competitive UK market.
We summarise some key findings from our research, but our full report is available to view at the bottom of the page:
North America is the most popular overseas market where agencies are active abroad (38%), followed by Germany, where 28% of respondent firms operate. These two key markets have swapped positions since our survey in 2019, when Germany topped the list with 26%, followed by North America (23%). Of those firms operating overseas, just over half (51%) say that North America has seen the greatest growth in placing candidates over the past year, with about a quarter (23%) saying the same about Germany.
Our findings reveal that 7% of firms have an attrition rate of greater than 40%, while close to a third of agencies (32%) report an attrition rate of less than 10%, and these rates have improved for all sizes of firm compared to the 2019 figures. Our survey also finds that, on average, 21% of recruiters leave within the first 12 months of employment but looking at this by firm size, we see that smaller firms appear to have made the most progress since 2019, with 5% fewer first-year exits in 2022.
Staff pay and incentives
The most common benefit offered by those surveyed is agile/flexible working, available at 93% of respondent firms, representing a 29% increase compared to our 2019 survey. However, flexible working has become the ‘norm’ post-pandemic and is an expected benefit when hiring. Given that 93% of firms say they offer their recruiters agile/flexible working as a benefit, it’s no surprise to find from our survey that only 7% of respondents expect employees to be in the office five days per week.
Our survey also reveals that 39% of firms incorporated an average pay increase of between 2% and 5% in their last annual pay review, while 21% incorporated no increase at all. A more generous 30% say they incorporated a pay increase of between 5% and 10%, while one tenth incorporated an increase greater than 10%.
46% of firms are currently offering enhanced maternity and/or paternity benefits (this wasn’t covered in our 2019 survey), showing that there are increasingly diverse workforces within recruitment agencies, but also recognition by business leaders of the importance of balancing family life with a career.
Additionally, we may have expected agencies to be making greater use of share option schemes to attract and keep hold of their talent, but there has only been a modest rise (up from 25% to 29%) in the use of share options since 2019. It may be the case that employees see cash as a more viable incentive, but share options remain a popular way of incentivising staff to retain talent.
Diversity and inclusion
Female representation in the sector has increased slightly since 2019. The most noticeable improvement is in the number of female recruiters and other staff, which has risen from 41% three years ago to 47% in 2022. Two thirds of firms (67%) say they now have between 20% and 60% female representation among their recruiters/resourcers.
Nevertheless, this shift in attitudes appears to be taking time to have an impact at more senior levels at recruitment agencies. While the average number of women on leadership teams rose slightly between 2019 and 2022 to 37%, almost half (46%) of firms have less than 30% female representation on their leadership teams and 18% have no female representation at all.
Preparing for sale
Many of the recruitment businesses in our survey (63%) say their appetite for a business sale has increased over the past 12 months – a sentiment that is broadly consistent across all sizes of firm. This is perhaps not surprising, given that many firms were trading at an all-time high during 2022, and with owners looking to take advantage of buoyant market conditions to achieve an exit.
Looking at our respondents’ feelings about the UK economic outlook by size of firm, it appears that larger recruitment businesses are slightly more pessimistic than smaller firms, with 69% feeling negative or very negative, perhaps because they have already been worse hit by falling recruitment activity or because they have better early-warning data of an economic downturn.
Unsurprisingly, the biggest challenge faced by firms we spoke to (85%) point to the shortage of job candidates, while 73% nominate a shortage of consultants – the same top concerns that were spotlighted in our 2021 report. It’s therefore unsurprising that 41% of firms, according to our survey, find holding on to talent to be one of their biggest challenges.