After the uptick in the number of completed transactions in the final two months of 2023, Q1 2024 followed suit with 31 transactions involving UK targets.

IT, technology and digital continued to be buoyant areas for recruitment transactional activity, comprising 20.4% of all deals in the sector in H1 2024. Specialist technology, such as the development of AI, has increased company valuations and the perceived attractiveness of businesses either placing candidates into this space, or successfully leveraging these technologies in their operations. In turn this has contributed to recruitment platforms and software agencies being the most prominent and attractive acquisition targets, ahead of generalist agencies.

Despite the above, even sectors that are typically robust such as technology and healthcare have faced challenges in talent retention and recruitment in 2024 which has inhibited growth for many recruitment businesses. There has been a softening of activity in H1 2024, particularly in terms of new jobs registered and the number of interviews. The conversion of interviews to accepted offers is the most significant area of challenge, as candidate and client confidence remains subdued for many businesses. It’s unfortunate that the industry-wide weakening of demand and slowing of hiring decisions that started in late 2022 and persisted across 2023, continued through the first half of 2024.

Statistics for June 2024 suggested that permanent placements declined at their steepest rate in eight months due to election uncertainty, reduced demand for permanent workers in the UK, and candidates seeking greater flexibility. This may result in more challenging headwinds into the second half of the year. We have also continued to see longer times to hire, impacted by low levels of confidence.

Some commentators are suggesting that the UK election outcome being in line with expectations may result in market stability, and the Labour Party has been clear in setting out its priorities of reducing NHS waiting times, investing in infrastructure and driving forward renewable energy initiatives. This could present opportunities for recruiters into healthcare, renewables and construction.

Other causes for optimism include reducing inflation data in the UK and expectations of further interest rate cuts following the Bank of England’s recent interest rate reduction from 5.25% to 5%, the first since March 2020.

These are early signs, but continuation of these trends could result in greater economic certainty which tends to facilitate hiring certainty and job creation.

The UK recruitment market is an increasingly international business and so economic certainty here may increase the attractiveness of UK businesses to overseas buyers – this has been apparent with cross Atlantic M&A activity in recent years.

The recent US jobs data suggesting that unemployment had reached a three-year high spooked markets and could present risks to UK recruitment businesses operating on the other side of the Atlantic. The looming US election on 5 November may result in further uncertainty in the coming months. However, both of these factors could increase the potential attractiveness of UK businesses to buyers from this market.