Overseas operations

Based on the feedback we gathered for this survey, the most popular overseas markets are North America and Germany, followed by the Netherlands and other European countries such as Denmark, Sweden, Switzerland and Norway.

Key overseas markets

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%).

In fact, 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.

Expanding into overseas markets of course continues to offer opportunities for higher margins and often less competition than the relatively saturated UK market. This can outweigh the challenges of meeting relevant local compliance obligations, building a local team that can replicate a firm’s business model in a new location and understanding the cultural nuances of a new market.

The better margins that overseas markets offer also help to improve earnings before interest, taxes and amortisation (EBITA), enabling recruitment firms to achieve a strong multiple on sale.

Unsurprisingly, firms are generally less focused on the developing world, with just 2% of respondents operating in South America, for example, given the challenges of operating in developing countries, although South Africa is reportedly becoming more popular with firms as a centre for outsourcing and back-office services placements.

Smaller overseas markets such as the Middle East, Singapore and Hong Kong – long popular with expat job candidates seeking sunshine and tax breaks – continue to see a slowdown, perhaps as a result of increased security concerns, although they remain important niche markets for some.

Brexit impact

Our survey results make it clear that Brexit hasn’t dented recruitment agencies’ appetite for operating in the European Union (EU) – if anything they suggest that Brexit has encouraged more firms to set up operations within the EU to capitalise on the opportunities within and between member states.

At the same time, many firms operating in the EU have expanded their in-house teams providing visa and other compliance services, or their use of third-party service providers, to ensure the relevant bureaucracy is processed as quickly as possible when UK candidates are placed in the EU and vice versa.

In our 2019 UK Recruitment Index report we noted that, given that 55% of firms were either partially or highly reliant on EU contractors, Brexit “could be a threat to recruiters over the coming months and years”.

However, underlining firms’ willingness to remain active in Europe, three years on our survey reveals that more than half of recruitment agencies (54%) are still either partially or highly reliant on EU contractors.

Unsurprisingly, those firms in this year’s survey who say they are not at all reliant on EU contractors are generally at the smaller end of the scale and therefore more likely to operate in the UK only.