The recruitment sector in the UK has seen consistent and robust growth over the last decade, with the total revenue touching £32.2 billion in 2016-17. According to Staffing Industry Analysts report, the industry is expected to grow by between 1.8 per cent and 5.8 per cent in 2017/18, between 1.6 per cent and 5.6 per cent in 2018/19 and between 0.7 per cent and 4.7 per cent in 2019/20.
Will the growth touch the higher end of the estimated percentage, or will the growth rates fall over the coming years? A lot depends on how the below factors impact the UK recruitment sector over the coming years.
1) GDPR and its impact on recruitment agencies
While most of the large and established recruitment agencies already have plans in place to comply with GDPR, many mid-sized, small and start-up agencies are still not prepared for it. Agencies that are not able to build GDPR compliance within their processes face the risk of steep fines: upper limit of €20 million or 4% or annual global turnover (based on the turnover for the preceding year) – whichever is higher.
Fines, however, present only one side of the coin. In order to comply with GDPR, agencies will be required to fundamentally change how they gather, manage, process, store and secure candidate data. Agencies will have to change many of their existing processes and policies to comply with GDPR. This has the potential to cause disruption over the next few years. This is especially true for start-up and mid-size recruitment agencies.
Perplexed by GDPR? Please check out our series of FAQs on GDPR and its impact on the recruitment sector.
- Part 1 explores the basics of GDPR and its potential impact on recruitment agencies.
- Part 2 looks at how recruitment agencies can deal with the GDPR laws around data collection and consent.
- Part 3 sheds light on how recruitment agencies can manage and share data in compliance with GDPR.
- Part 4 tackles key questions around how to manage your relationship with outsourcing service providers in context of GDPR.
2) IR35 in the private sector
After the introduction of IR35 in the public sector, sourcing candidates for the temporary placements became a lot more difficult as a large portion of candidates that previously operated as PSCs were deemed to be within IR35. As the government considers rolling out the regulations to the private sector, the difficulty of recruiting temp workers is likely to exacerbate. At this juncture, it is not clear when IR35 will be extended to the private sector, but industry experts agree that it’s just a matter of time.
Coupled with the potential shortage of skilled EU workers post-Brexit, the IR35 reforms in private sector can lead to a drop in temporary volumes and an increase in perm placements. As a result, more candidates may choose permanent positions. Contractors in the private sector are also likely to increase their day rates as a response while many companies may push contractors to use umbrella services to mitigate the risk. A large number of companies will refuse to take the risk and administrative burden of sorting IR35 ‘outside’ or ‘inside’ candidates and simply consider every worker as falling within IR35.
3) Brexit deal and its impact
The terms under which the UK departs from the EU and the type of agreements in place post-Brexit will have a major impact on the growth rate of recruitment market over the coming years. Answers to the below questions will determine which parts of the sector grow and which ones languish.
What will be the state of the UK economy and how will it impact the demand for candidates? In case the job market is sluggish for a long duration, a negative impact on the recruitment sector cannot be ruled out.
What type of immigration restrictions will be placed on candidates from the EU? Will it still be easy for them to work and live in the UK? If the demand for candidates stays strong but there’s a shortage of skilled resources, recruitment agencies can command higher margins.
If you’d like to discuss how these forces are likely to impact your agency and want to prepare yourself for the future, don’t hesitate to get in touch with our recruitment sector specialist on firstname.lastname@example.org.