Record high in recruitment industry turnover reflects strong growth in the UK economy

Turnover in the UKís recruitment industry, which has hit the highest levels on record, is a strong indicator of the current growth within the UK economy, the annual industry report launched today (Monday November 6) has revealed.

The sharp increase in industry turnover was one of the principal findings in the Recruitment and Employment Confederationís Annual Industry Turnover and Key Volumes Survey 2005/06, published in association with Ernst and Young.

In the period covered in the report ñ April 2005 to March 2006 ñ the overall turnover from both permanent and temporary/contract recruitment rocketed to an all-time high of 24.838 billion compared to 24.249 billion in the previous year. The 5.8 per cent growth it represents is the highest rate since 2000/2001.

Temporary and contract recruitment still continued to grow at a significant rate rising by 6.4 per cent to 21.6 billion in the period ending March 2006.

Because overall, temporary and contract volumes have still not returned to the high levels of 2003, a significant switch by many recruiters to permanent business during the period saw turnover climb two per cent from 3.211 billion last year to 3.275 billion during 2005/06. Conversely, the rate of growth in this area reduced with in the overall share of the market reducing 0.5 per cent to 13.2 per cent.

In terms of volumes, permanent placements saw a 7.9 per cent increase from the previous year, with 706,080 placements made compared to 654,203 in 2004/05.

Most permanent placements were in secretarial and clerical, accounting for 30 per cent of the market - twice as many as those placed in computing and IT, which totalled 15 per cent.

Again, secretarial and clerical placements ñ a total of 24 per cent - topped the temporary league with industrial/blue collar placements coming in second at 18 per cent.

The UKís temporary and contract workforce also showed a 3.8 per cent increase with the number of workers on a firmís payroll rising from 1.21 million to 1.26 million.

Also falling back slightly was the number of staff employed in the recruitment industry. This figure dropped 1.6 per cent from 99,188 in 2004/05 to 97,674 this year. Much of this was due to the reduction in non-sales roles such as administration and management.

This also resulted in the first decrease since 2001/02 of the number of staff working at branch/site level the recruitment industry ñ a reduction of -1.6 per cent. In keeping with this trend, the number of consultants working in specialist/contract businesses also declined slightly.

Marcia Roberts, the RECís Chief Executive Officer, said of the Report: ìThe fortunes of our industry are inextricably linked to the overall health of the UK economy, GDP and most other economic indicators remained relatively strong for the period of the survey and this yearís Annual Turnover Report reflects this picture.î

Most of the growth, she said, could be attributed to temporary business bouncing back from last yearís lull with the growth in permanent recruitment reflecting the demonstrable value offered to clients and work seekers.

ìIt is sometimes easy to forget how fast and how far the recruitment industry has come in a short space of time,î she said. ìLess than ten years ago, we were reporting a total turnover of just 10.5 billion. The scale of our industry and its contribution to the economic and social well-being of the UK is now becoming increasingly understood.î

This expanding profile offered a great opportunity and also great responsibility to the whole industry, Marcia explained. ìMy mandate from the REC Board is based on the belief that driving standards forward has to be a priority. Raising standards will open new commercial opportunities for those agencies able to demonstrate to clients that they are committed to the highest levels of professional achievement.î

Marcia concluded: ìThese results are cause for celebration but I would ask everyone in the recruitment industry to use this success as an opportunity to ëraise the barí to a new level. Only then I believe can we reach our full commercial and professional potential.î

Gordon Cullen, Director of Ernst and Young, added: ìThe recruitment industry has enjoyed a good year with revenues increasing in both temporary and permanent recruitment. Recruiters are becoming increasingly indispensable in the search for suitable talent as the UK is seeing significant skills shortages in certain sectors. There are now serious shortages in construction and engineering as the country is embarking on a number of major construction projects. The government is looking to improve the infrastructure surrounding our railways and the Olympic project in Stratford is becoming Europeís largest construction project. Consequently, construction companies are becoming increasingly reliant on recruitment agencies to find staff to fill vacancies.

ìThere are similar shortages in the City as large accountancy firms fight over both newly qualified and senior accountants and there are similar shortages in IT and banking,î he explained.

ìThe recruitment industry in increasingly looking at innovative ways to fill the skills shortages and the recent influx of skilled workers from Eastern Europe is providing a significant boost to the UK economy. ì

ìWithout this flow of workers it is likely that the economy would be expanding considerably more slowly as UK companies would be unable to take advantage of opportunities to sell goods and services as they would have no staff to carry out the work.

Gordon concluded: ìThe age discrimination rules which came in during October also provide a fantastic opportunity to the UK recruitment industry. We are now seeing a shift in the UK population as the over 50s are set to grow disproportionately to the rest of the population.

ìCoupled with the fact that people are living longer and pensions continue to provide disappointing returns, there is a huge number of people out there who want to work and can be retrained to fill the vacancies that companies struggle to fill.î

The Report was compiled by the RECís Industry Research Unit. Copies of the Report are available from the REC, www.rec.uk.com/research.