Spring Forward: With insolvencies on the rise is it becoming harder to find the right Recruitment Agency?
Recruitment agency insolvencies on the rise means it’s tougher for employers to move forward.
With the labour market slowing significantly in the last 18 months, many UK recruitment agencies have faced an uphill battle. Some have found the going too tough, with the latest data revealing a 14% increase in liquidations among recruitment agencies over the past year after a an even bigger jump the year before. Insolvencies leapt from 275 in 2021/22 to 363 in 2022/23 to 413 in 2023/24. This marks the third consecutive year of such increases, according to research conducted by Mazars, the international audit, tax and advisory firm, which recorded only 221 recruitment firms go under in 2020/21.
The Hiring Slowdown and Its Impact
The recent slowdown in hiring across the UK has created significant challenges for recruiters. During the three months from November 2023 to January 2024, the number of UK vacancies declined to 932,000, compared to 1.14 million vacancies during the same period a year earlier. The ripple effect of this hiring slump has put immense pressure on recruitment agencies to adapt and survive.
Navigating Economic Uncertainty
Several factors contribute to agencies’ struggles. Rising interest rates have led many businesses to cut back on hiring, affecting the overall demand for recruitment services. Additionally, recruiters operating in the temporary market face cash flow challenges, often find themselves paying contractors before receiving payments from clients. Similarly, senior team members’ salaries must be covered even before client invoices are settled. In an uncertain economy, clients may delay payments, exacerbating the financial strain on agencies.
Pandemic Fallout: Debt Burdens and Survival Strategies
The pandemic-induced economic downturn hit recruitment agencies hard. Income streams dwindled to near zero during lockdowns, leaving agencies with limited options. Many turned to government-backed BBLS loans (Bounce Back Loan Scheme) as a lifeline. However, some agencies now find themselves unable to meet loan repayments, pushing them toward insolvency.
The Pandemic also brought challenges for agencies to recruit staff for both clients and their own business, coupled with the change to working from home in an industry which previously had a very office-based culture.
KPI bucks the trend
Ryan Jardine, Managing Director at KPI Recruiting believes the economy is now turning the corner though. “These latest statistics demonstrate how difficult the sector has become for many agencies,” said Ryan, “but KPI’s performance has certainly bucked the trend. Diversification into new markets has been important for us, but we’re now finding that our original specialisms are coming back stronger as the economy slowly recovers.”
Recruitment agency options
As the recruitment sector shrinks, some major employers are experiencing problems with choices for their recruitment partner. “It’s becoming harder for clients to choose a recruitment agency that is both financially stable and has the agility and responsiveness to innovate,” said Sales Director Joe Jardine. “In a recruitment space that has changed dramatically in the last few years with challenges from Brexit, COVID, home-working and AI, clients need an agency that’s strong commercially and open to new ideas. KPI ticks both those boxes.
“Many bigger UK businesses need more options when it comes to recruitment agencies, instead of relying on the same old faces that are pricey and tend get complacent,” said Joe. “KPI offers something genuinely different in a market that is full of agencies offering virtually the same service.”
If your business needs an agency with a different approach, call Joe Jardine on 07874 867453 or email JoeJ@kpir.co.uk.
