The UK market for recruitment consultants is expected to expand by 8% in current terms in 2014, with underlying sales growth supported by rising vacancies across the economy.

Employers are gaining confidence in the strength of the economic recovery and this is translating into rising permanent placements along with continued growth in temporary recruitment. Indicators suggest that wages of placed candidates are increasing in a number of sectors, though not all, and vacancies now exceed the number of staff capable of filling them. In sectors affected by skills shortages, candidates’ salaries and recruiters’ fees are rising sharply.

Figure 1: UK market for recruitment consultants, 2010-14

(£ billion)

Source: MBD and trade estimates

The permanent placement sector will expand by an estimated 12% in current terms in 2014. Trade sources suggest that growth is being driven by demand for skilled professional roles in areas such as accountancy and marketing.

The temporary placements sector is projected to grow by 7%, boosted by rising demand for temporary staff in sectors such as construction and hospitality. The number of available temporary staff is falling and rates are climbing as a result, boosting recruiters’ fees.

Figure 2: Segmentation of the UK recruitment consultants market, by type, 2010-14

(£ billion)

Source: MBD and trade estimates

As people’s confidence continues to rise, demand for consumer services is expected to generate an increased requirement for staffing in the retail, leisure and accommodation sectors over the coming year. Companies are already shortening recruitment processes as they have more vacancies to fill and this will help agencies increase business volumes in 2015.

Figure 3: Forecast UK market for recruitment consultants, 2015-19

(£ billion at 2014 prices)

Source: MBD forecasts

Growth in job vacancies accelerated across 2013 and has fuelled demand for recruitment services. The number climbed by 7% in Q1 2014, the highest quarterly increase in the past five years.

Growth in vacancies has been most apparent in the construction sector, where the number has climbed 67% over the past year. The professional services, education and health sectors have also generated rising demand for candidates.

Figure 4: Change in employment vacancies in the UK, by sector, 2013-14

(Percentage change)

Note: Data compared is from Q1 2013 and Q1 2014

Source: ONS Labour Market Statistics

The nature of the UK’s workforce is changing, with the working population over 45 years old projected to expand quickly over the five years to 2017. Conversely, the working age population below 45 years old is forecast to shrink, creating a rising age bias among the workforce.

The changing make-up of the working population is expected to benefit the temporary recruitment sector. Individuals above 45 years old that are working longer are likely to engage in contract work and employment allowing more flexible hours.

Figure 5: UK population projection, by age group, 2012 and 2017

(millions)

Note: Projections based on 2012 data

Source: ONS

The economy is suffering more acutely from skills shortages as vacancies rise. A lack of technical engineering and IT skills is particularly apparent, resulting in a dearth of talent to fill roles in industries such as manufacturing.

Shortages create opportunities for recruitment consultants with developed candidate networks in these areas, who will be able to demand greater fees for sourcing. The manufacturing, IT and utilities sectors are among those struggling to attract high quality candidates for vacancies.

Figure 6: Skills shortage vacancies (SSVs) in the UK, by sector, 2013

(Share of total vacancies that are SSVs)

Source: UKCES Employer Skills Survey

Impellam Group’s financial performance was mixed in 2013. While its core UK business increased revenues, the Medacs Healthcare business saw an 8% decline in sales. The Carlisle Support Services business also performed badly, with revenues falling 11% in 2013, and the company reported in February 2014 that it expects to lose a further £9.8 million exiting current contracts under the Carlisle business.

Acquisitions are a continued focus for Impellam Group. The purchase of Career Teachers, announced in March 2014, represents a move into a sector expected to generate increasing returns in the next five years. The launch of the US brand Guidant in the UK demonstrates the company’s desire to exploit what is anticipated to be increased demand for fully-outsourced recruitment solutions in the coming years.

Page Group’s 2013 report shows that UK revenues climbed marginally by just 1% compared with the 12 months to the end of 2012. The company increased its fee-earning employee base in the UK during 2013, demonstrating its confidence in the durability of the economic recovery. Permanent placements are up as a share of revenues, reflecting wider market conditions that have led to a sharp increase in demand for permanent staff through the past year.

Companies in consumer-facing industries are expected to generate increased demand for recruitment services in the next 12 months, as rising confidence translates to increased spending. Retail, leisure and hospitality firms are among those anticipated to provide new business opportunities. Recent acquisitions targeting smaller operators supplying the medical and education field look promising, with these sectors likely to increase hiring activity. Graduate recruitment is forecast to accelerate as companies look to address skills shortages by attracting high calibre university leavers and training them in house. Recruitment agencies with developed talent sourcing and research capabilities are expected to perform well as the market becomes more candidate-led and available skilled professionals are scarcer. In the long-term, the temporary sector will benefit from an ageing workforce likely to seek more flexible employment arrangements.