The recruitment industry is now much smaller than it was before the recession, with fewer companies operating in the market; although, since September 2009, recruitment firms have noticed a slight improvement in market conditions, perhaps signalling the worst may be over

The recruitment industry in the UK has a lot of ground to make up to return the market to where it was not just before the recession, but five years ago. In a new Market Report – Recruitment Agencies (Permanent) market intelligence provider Key Note forecasts that the value of the permanent recruitment market will decline by a further 4.2 percent in the year ending March 2010, but that it will begin a gradual recovery thereafter. 

In February 2010, it is still difficult to assess the extent to which the market will recover and the improvement, when it comes, is likely to be very gradual. Although the economy has started to grow in 2010, albeit by 0.1 percent, economists that Key Note has spoken with cautioned that a recovery is more likely to be sustained in the second half than in the first half of the year.  Furthermore, based on previous recessions, growth in employment levels usually lags behind growth in the economy. This suggests that demand for new staff will not start to emerge strongly until the second half of 2010.In the year ending March 2009, the value of the permanent recruitment market stood at £2.61bn, and the number of permanent placements made was 582,803. These figures represent a massive drop of 39 percent and 19.8 percent, respectively, compared with the previous 12 months. This slump has been devastating for recruitment firms, and every sector of the market has been impacted, with jobs in financial services, construction, property and retailing being particularly affected. Key Note predicts that the sectors of the market that are likely to show some reasonable improvement in 2010 include utilities, social care, financial services and technical/engineering. Of these, technical/engineering and social care are likely to be significant growth areas.

Overall, the immediate outlook for the permanent staff recruitment market is better than it was for 2009, but it remains weak. Key Note anticipates that the market will still be intensely competitive in 2010, and that total revenue will decline, before beginning a slow recovery to finish the forecast period (2010 to 2014) at £3.1bn. The market’s value is not only dependent on the demand for new permanent staff, but also on the willingness of clients to use recruitment firms; therefore, it will also be under the influence of fee rates, which are unlikely to rise in 2010, and may even be squeezed further. 

Many firms operating in the recruitment market have been hanging on during 2009 expecting an upturn by the end of the year or early in 2010.  However, for some of these companies, the recovery will come much too late.

26 February 2010