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Despite a challenging economic environment, new research from business advisory firm, Deloitte, and the Association of Professional Staffing Companies (APSCo) found that growth and investment are firmly back on the agenda for the UK’s professional recruitment sector. The inaugural ‘APSCo Deloitte UK Recruitment Index 2013’, found that almost three quarters (72%) of professional recruitment firms surveyed, recorded an increase in net fee income over the prior 12 month period, with over a quarter of those reporting revenue increases of more than +30%.
The survey also found that 63% of respondents are generating fee income from international markets, and of those, 43% have physical overseas offices. The remaining 57% generate overseas income from a UK base. The data also revealed that international net fee income stood at £1.4m per average overseas office, compared to just £0.3m per average UK office. This is a reflection of the growing international mobility of talent and the fact that today’s organisations, regardless size, can now compete on a global stage.
Ann Swain, chief executive of APSCo commented: “As confidence begins to return to the sector, we are seeing [a] renewed appetite for investment, particularly with regards to opening new offices. Firms are likely to be considering overseas investments as their clients continue to expand into new markets. The recruitment profession must mirror the international ambitions of its client base, to effectively support their human resource functions.”
Almost two-thirds of firms surveyed (61%) plan to open new offices in the next year. This echoes the sentiment from Deloitte’s latest CFO survey which found that 45% of CFOs believe now is a good time to take financial risk, the highest in six years and more than double the level a year ago. While these results will be welcomed by the sector, there is still an air of caution, with 70% of respondents highlighting financial growth and 66% stating increasing headcount as key challenges in the year ahead. Interestingly, just over a fifth (21%) felt that making full use of social media channels was also a challenge, highlighting the evolving nature of routes to market.
Katie Folwell-Davies, recruitment industry services partner at Deloitte, commented: “Over the past 12 months, we have seen some cautious signs of recovery. Whilst many of the listed companies have reported challenging conditions, specifically in the UK and European markets, a number of privately owned companies are trading strongly. Pockets of growth can certainly be found amongst those specialising in expanding, niche sectors. Talent is high on the board’s agenda and will continue to be a main priority over the next year.”
According to the research, firms with deep, niche sector expertise outperformed organisations that operate across a broader range of industries. Those that can adapt quickly to changing client demands and deliver candidates with specialist skill sets are well placed to reap the rewards.
The research also compared profit margins across different niche sectors. In the temporary recruitment market, for example, education proved to be the most profitable sector with a 24.5% margin. Media and marketing (23.2%) and health and life sciences (18.2%) achieved second and third respectively. In the permanent market, apart from Executive Search, the highest average fees as a percentage of salary were achieved by the accounting and finance sector at 19.5% closely followed by the media & marketing and oil & gas sectors at 18%.
Ann Swain continued: “From a profitability perspective, the media and marketing sector is a fairly new category to emerge as one of the front runners. However, member feedback tells us that that there are far more vacancies than there is available talent. This critical talent shortage could be partly explained by the fact that many organisations are putting more emphasis on their digital strategies and there appears to be fewer candidates with the marketing discipline running alongside. As businesses continue to invest in digital marketing to drive growth, those recruiters that are able to source these rare, niche skills will invariably do well.”
Katie Folwell-Davies concluded: “Looking at the report findings, the professional recruitment industry has one foot on the road to recovery but we still have a long journey ahead. In recent weeks, our newspapers have been awash with improving economic indicators and our report echoes this positive sentiment. However, margins remain squeezed and the domestic market continues to offer limited growth opportunities, except for those firms who have been able to exploit untapped niche industries. Recruitment businesses must be savvy about the geographies and specialisms that they choose to invest in over the next 12 months.”