Survey of Surveys: Recruitment

For headhunters, NHS expansion helped offset the IT contract slump. Now rising job vacancies promise good fee earnings - if agencies can locate the talent, says Matt Farquharson The UK recruitment industry is the most developed and competitive in the world. The US market may be worth roughly three times as much as Britain's (see table, top right), but the US has a labour force almost five times as large. Figures from the Government Turnover Inquiry (GTI), Recruitment and Employment Confederation (REC) and market intelligence firm Key Note value the UK industry at between £20 billion and £23 billion.

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Last Updated: 31 Aug 2010

There are essentially two recruitment markets - retained and contingency.

Retained firms work on senior roles and require part payment upfront (typically a third of the final fee), and further payments are made on presentation of a shortlist and the new employee starting. Contingency agencies are paid on success only.

Neither market has been particularly buoyant in recent years. Recruitment budgets were the first to be reined in as corporate purse-strings were tightened from late 2000 across most sectors. The UK recruitment industry, which had seen nothing but growth since its inception in the 1950s, began to feel the pinch.

The GTI notes that in 2002, turnover for the UK recruitment industry fell for the first time, recording a drop of 4.6% on the previous year to £22.3 billion. In 1992, industry turnover had been just £3.9 billion.

This 571% increase over 10 years made a lot of recruiters wealthy and helps to explain the fragmented nature of the industry today. With a phoneline, internet connection, good contacts book and fees of anything up to one-third of first-year's salary, a one- or two-partner firm could turn in strong profits quickly. Today, the top 10 account for less than 23% of total UK turnover.

The temporary market, which accounts for more than 93% of total turnover, offers the best indicator of the health of the industry. Temps are the first to be hired when demand increases and the first to be cut when times are tough. Although almost 100,000 more temporary workers were placed in 2003 than in 2002, turnover in the UK temp recruitment market was down more than £1 billion. While the lucrative IT contract market has been in a slump since the end of 2000, the slack has been taken up by the less-well-paid nursing/medical sector. The NHS staff shortage and high turnover in the health sector has been good news for recruiters of temporary medical personnel, such as Nestor, but nurses don't bring in revenues comparable with IT contractors earning hundreds of pounds a day. The REC notes in its sector split that in '02/03, nursing/medical became the largest occupational sector for temp recruitment for the first time, with 23.6% of the total UK temporary market.

The UK market is still dominated by the monolith that is Adecco and, as yet, its business seems unaffected by the accounting scandal and 'material weaknesses in internal controls' in its North American operations. The boost to Spring's operation is largely explained by the acquisition of IT recruitment firm Best International, which contributed £90 million to the group's '02/03 turnover.

The struggles of US firm MPS can be attributed to its UK focus on IT and financial recruiting - currently the quietest markets. The biggest loser, though, is Reed. The recent legal scrap with publisher Reed Business Information over use of the name has not helped, but the turnover slump is more likely to be the result of Hays pushing on in accountancy and insurance, areas where Reed has been strong. This may explain why it was the only firm in the top 10 to refuse to provide its temp figures.

While this top 10 offers a range of services including, in some cases, executive search, most of their revenue comes from contingency recruitment at mid to low levels. The headhunting market is best considered by looking at the specialists. These companies turn over a much lower volume but can bring in outlandish fees. Industry rumours suggest search fees as high as £750,000 may have been paid for the placement of a single chairman.

With the exception of Swiss firm Egon Zehnder, which benefits from a close working relationship with McKinsey, the big boys in this field are American.

The two leaders among the Big Five, Korn/Ferry and Heidrick & Struggles, retain their pre-eminence through aggressive business development. The $148.9 million in turn- over lost by the three behind them correlates closely to the $161 million turnover gained by the leading pair.

A tightening job market brings good and bad news for recruitment firms.

Figures from the Office of National Statistics for the year to March 2004 show that earnings are rising at the fastest rate for three years. The average number of job vacancies for the three months to April 2004 was more than 618,000 - 43,000 more than a year earlier. This is good news for fees. But as the same figures show unemployment to be at its lowest for nearly 30 years, the competition for a dwindling pool of talent will be fiercer than ever.

HEADHUNTERS - BIG FIVE WORLDWIDE

2003 revenue % change on No of No of

(dollars m) '02 revenue consultants offices

Korn/Ferry International 430 27 433 73

Heidrick & Struggles 420 18 337 60

Spencer Stuart 210 -22 291 52

Russell Reynolds Assoc 190 -3 195 31

Egon Zehnder Int'l 180 -32 297 58

SOURCE: HUNT SCANLON/KEY NOTE

 

RECRUITMENT - TOP 10 IN THE UK

2003 turnover % change on No of UK Permanent

(pounds m) '02 turnover offices staff

Adecco Group 987.0 4.00 500 3,000

Hays Personnel Services 911.1 19.57 200 3,025*

Manpower UK 731.0 -12.82 300 1,140

Nestor Healthcare Group 482.7 20.38 380 6,000

Vedior 456.1 -1.00 186 1,421

Spring Group 390.0 19.12 51 1,000

Corporate Services Group 388.0 -12.69 193 1,298*

Reed Executive 349.4 -14.15 250 2,000

Pertemps Group 343.5 -2.14 173 1,423

MPS Group International 240.0 -15.79 19 750

*COMPANIES' OWN FIGURES. SOURCE: RECRUITMENT INTERNATIONAL TOP 100

REPORT

 

TOP FIVE RECRUITMENT MARKETS WORLDWIDE

Value 2002 Value 2003 Change

(dollars bn) (dollars bn) (%)

US 94.5 95.0 0.05

UK 33.6 33.0 -1.80

Japan 15.0 15.1 0.70

France 14.7 14.3 -2.70

Neth'l'ds 8.4 9.2 9.50

SOURCE: KEY NOTE

 

UK MARKET - VOLUME BY SECTOR

% permanent % temporary

market market

'02/03 '02/03

Secretarial/clerical 34.5 18.6

Professional/managerial 10.4 1.3

Financial 10.3 1.6

Technical/engineering 7.5 8.2

Hotel/catering 4.6 2.8

Computing/IT 3.8 1.9

SOURCE: REC

 

WORKFORCE AND EMPLOYMENT WORLDWIDE

Total work- Population Employment

force (m) in work (m) (%)

US 141.8 133.58 94.2

Japan 67.7 64.04 94.6

Germany 41.9 37.79 90.2

UK 29.7 28.16 94.8

France 26.6 24.18 90.9

Italy 23.6 21.45 90.9

Poland 17.6 14.59 82.9

Spain 17.1 15.18 88.7

Neth'l'ds 7.2 6.98 97.0

Sweden 4.4 4.22 82.9

SOURCE: CIA WORLD FACTBOOK

 

TOP 10 UK RECRUITMENT WEBSITES

Unique users Jobs

per month on site

fish4jobs.co.uk 929,335 35,000

hotonline.co.uk 749,898 52,544

totaljobs.co.uk 708,000 45,000

jobsite.co.uk 628,107 78,000

reed.co.uk 500,000 137,693

workthing.com 418,443 23,970

monster.co.uk 413,357 25,000

thegumtree.com 350,000 11,201

guardian.co.uk/jobs 326,203 4,500

britishjobs.net 314,500 12,000

SOURCE: ONLINE RECRUITMENT MAGAZINE, DEC 2003

 

10 UK SECTORS WITH THE HIGHEST JOB TURNOVER

% per annum

Hotels, catering and leisure 41.3

Call centres 40.5

IT services 32.2

Food drink & tobacco manufacturing 31.8

Retailers & wholesalers 30.6

Finance, insurance & real estate 20.4

Mining & quarrying 20.0

Media & publishing 19.3

Other private-sector services 19.3

Construction 18.9

SOURCE: CIPD LABOUR TURNOVER SURVEY 2003

85% of UK businesses had difficulty filling vacancies last year, citing

candidates who lack skills or experience as the main reasons. The

average time taken to fill a vacancy is nearly nine weeks.

SOURCE: CIPD LABOUR TURNOVER SURVEY 2003

34% of UK businesses made 10 or more redundancies last year. The most

common reasons for redundancies were cost-cutting, plant or office

closure and reorganised working methods.

SOURCE: CIPD LABOUR TURNOVER SURVEY 2003

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