Recruiters target growth as the market bounces back

• More than half of recruiters expect to grow by up to 30% in the next 12 months
• A shortage of candidates is the biggest challenge facing the sector.

More than half of recruiters expect to grow their business by up to 30% in the next 12 months, as the market bounces back to pre-pandemic levels.

A survey of recruitment, payroll and outsourced providers – carried out jointly by BDO North West, NatWest and Brabners – has found that all companies surveyed expect to grow net fee income (NFI) over the course of the next year, with 52% anticipating a rise of between 10 and 30%.

As part of a joint event looking at how to drive value for recruitment businesses, questions were raised around attracting, retaining and incentivising teams; new possibilities around funding for growth, including the Recovery Loan Scheme and RapidCash; as well as the current market appetite for investment, valuations and deal activity.

James Fieldhouse, M&A Managing Director at BDO in Manchester, said: “At the beginning of 2021, sentiment amongst recruitment leaders showed that the combination of Brexit and the global pandemic was presenting complex trading conditions. Whilst these challenges have evolved, there is clear evidence that the sector is bouncing back.

“With the economy now re-opening and taking a new shape, in certain sectors recruitment is flourishing, and firms that sit within niche segments, or those that have diversified, are understandably thriving.”

The online event also revealed the biggest challenges facing the recruitment sector are a scarcity of candidates (59%), with a third of respondents citing a shortage of consultants. Cashflow or business financing, as well as a slowdown or lack of demand in the market, were also flagged as areas of concern.

However, BDO’s recent 2021 Mid-year Recruitment Market Snap-shot shows renewed optimism in the recruitment market. According to the report, M&A activity has started to gather some real momentum, with 20 UK sector deals taking place in H1 2021, compared to 21 in the whole of last year.

Fieldhouse commented: “M&A activity is booming across many sectors and recruitment is no exception. At the same time, funding for organic growth is readily available, while some recruiters are looking to grow or achieve efficiencies by acquisition, with some deciding now is the time to de-risk.

“The abundance of capital available from private equity and other investors is continuing to drive deal activity within the recruitment sector, with a draw to those companies with excellent management teams and operations in markets and sectors which are experiencing growth in the current economic climate.”

Simon Whitehead, Partner and Head of the Recruitment Sector at Brabners, said: “Our survey reflects the focus on growth of many of our recruitment clients. It seems as though 2021 continues to be a transformative year for many recruitment businesses, despite new challenges arising as the economy recovers from the effects of the pandemic.”