Introduction
This is the first UK Recruitment Index compiled at a time when we can finally look at the worst effects of Covid-19 ‘through the rear-view mirror’.
Our reports in 2020 and 2021 focused on resilience in response to the pandemic rather than in-depth financial analysis. This report – based on a survey of recruitment agencies and executive search businesses over winter 2022/23 – returns to the financial benchmarking of our last pre-Covid report in 2019.
That being the case, we felt it would be of particular interest to compare the results for 2019 and 2022, where relevant.
As usual, the survey provides useful benchmarks for firms to measure themselves against their peers – comparisons that may prompt some businesses to re-examine their operations, if they seem markedly out of line with the rest of the sector.
To widen the scope of those comparisons, this report also focuses on some new questions within the survey, providing insights on topics such as diversity and inclusion, pay increases, flexible working and broader views on the outlook for the sector and the wider UK economy.
Recruitment context
Reflecting on the background context to this report, 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.
The slowdown has been felt most acutely in permanent placements, especially in the US, while demand for contract/temporary positions has remained relatively strong, particularly in the UK and Europe, as employers look to counter difficult trading conditions through more flexible workforces.
The slowdown in recruitment activity continued into Q1 2023 but as is often the case has been to some extent sector dependent. Firms operating in retail and leisure have been most heavily affected, as have those servicing the tech sector, with high-profile lay-offs among tech giants like Amazon, Facebook and Twitter. However, recruitment firms in highly specialised sectors, such as clean energy, have seen growth with continuing demand for placements.
Looking forward
For the remainder of 2023, many respondents to our survey talk of “challenging times ahead”, underlining current forecasts that the UK will be the worst performing of the G20 major economies this year.
Firms that took on extra recruiting talent during the post-Covid bounce back may now be reassessing headcount in light of a tougher environment.
However, our survey respondents also highlight the many opportunities that still exist for firms, and we should remember that the current recruitment slowdown is more of a tailing-off in activity in comparison to the strong growth that many firms saw in 2021 and H1 2022.
While uncertainty in the global economy still exists, businesses will continue to monitor their resource requirements and look at alternative ways of hiring, whether that is limited permanent positions or more contractors. Businesses are still hungry for talent but are looking at recruitment in a more measured way.
Demand for tech recruitment is expected to recover and is likely to remain one of the biggest areas of growth, while the clean energy sector is creating lots of new opportunities, with growing international agreement, including from the US, on measures and targets to transition away from fossil fuels.
Greater use of technology by recruitment firms themselves represents a major opportunity to improve efficiency and streamline processes to deliver better margins and it will be interesting to see if that comes at the expense of headcount.
Some firms will doubtless look to grow by expanding into overseas markets – the US and Germany remain the most popular destination, according to our survey – attracted by higher salaries, better margins and often less intense competition.
Finally, our survey shows the recruitment sector is slowly making progress in increasing the number of women working at firms and appears to be more committed to driving greater diversity and inclusion more broadly. However, with still relatively limited female representation at board level, it’s clear there’s still plenty of work to do on this front.
We hope you enjoy this report and find it useful.
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