Jamie: I’d say the biggest challenge is the shortage of candidates and job opportunities. Companies are currently holding back on recruitment due to the uncertainty in the economy and the hike in interest rates that are starting to impact their profitability. From a recruiter perspective this will mean increased competition for the jobs that are available. This could result in margin reductions and an overall reduction in EBITDA. However, through the development of technology to improve recruitment processes and the retention of key talent, it should allow recruitment companies to consolidate/improve margin and take advantage of the opportunities that arise, as more confidence enters into the economy.

Niraj: Some of the trends and challenges we saw in 2023 will continue into 2024, however there is cause for cautious optimism given a more stable macro-economic environment. There is better visibility with regards to interest rates and inflation is expected to continue to fall, which will create favourable conditions for decision making. Whilst this will give businesses the ability to make investment decisions with increased confidence, it may take time for this to translate into new hires, where employers may take a “wait and see” approach until the second half of 2024. This being the case for the wider human capital market, there are certain sectors that will continue to thrive despite these headwinds.

Sophie: I agree, talent shortages in the sector has unfortunately been a persistent theme in recent years. This does, however, create an opportunity for a lucrative buyer's market for recruitment specialists with strong teams. The rise of private equity (PE) is also really key, and PE firms see recruitment as a resilient and scalable sector.

Jamie: Supporting our clients will be essential during 2024 - providing them with the right advice on the matters that will impact their business both positively or negatively. We need to make sure we understand their business and strategy, and act as a sounding board when discussing areas such as tax/M&A activity or international expansion. With our expertise in the sector and through our international network (Nexia), we can provide the relevant support on the areas noted in question and beyond.

Niraj: From my perspective, we always look to support our clients through continuing to get a well-rounded understanding of financial, tax and strategic aspects of their business. This could be from discussing opportunities to optimise funding structures, to staff retention strategies, to exploring opportunities for organic or acquisitive overseas expansion. We do keep an eye out for opportunistic M&A situations for clients operating in certain sectors.

Jamie: The development of AI and technology to help improve processes and efficiencies for both themselves and clients will potentially help to improve their market value as well, as companies move away from being a purely recruitment firm, into a recruitment/tech company instead. This might also help to move the dial upwards on the EBITDA multiple.

Niraj: The use of technology will continue to play an important role and will evolve at an increasing pace which will require ongoing refinement and investment. Smaller companies will naturally be more agile, however will eventually need the financial backing of larger corporates or investors in order to scale and realise meaningful long term value. Valuations can be enhanced where it can be demonstrated that technology is being leveraged to create higher margins and is scalable. Strategic buyers may be prepared to pay a premium where key technology can be rolled out across wider parts of their business, saving time and set up costs.

Sophie: I think technology and healthcare are the main sub-sectors to watch. The rise of AI and tech-enabled solutions makes the tech sector attractive, particularly the acquisition of tech specialists. Ongoing talent shortages in the healthcare sector, notably in the NHS, have also driven increased M&A in this area, as companies with existing NHS supply are attractive targets.

Niraj: I agree that key sectors growth sectors will be in technology, healthcare & social and cleantech, which will naturally create M&A opportunities. A combination of structural demand and government support in these sectors will support job creation and labour supply in these industries, creating organic growth. Buyers will be attracted by recruiters operating in these sectors showing demonstrable sustainable growth with strong cash flow conversion.

Jamie: The sectors that Sophie has mentioned will continue to provide opportunities for growth, but as noted earlier in the report, a more specialist approach for tech recruitment will be important. Clean energy/climate control is another sector that will continue to see large growth potential over the coming years with the continued push by the major countries to reduce their emissions.