Recruiters face testing times as employment worries mount

A survey in July by HSBC Professional Services found that four out of five UK recruiters were predicting a drop in income this year of anywhere between 15 to 30 per cent. The majority were already cutting costs and taking up financial support from the Government to stay afloat.

Of those questioned, 85% were using the Government’s income tax and VAT deferment schemes, and 40% had secured an emergency coronavirus loan. Some had cut costs through reductions in staffing and remuneration.

The difficulties were highlighted by international recruitment firm Hays, which has offices in Aberdeen, Dundee, Edinburgh and Glasgow. Releasing its annual results for the year to the end of June, the group reported a 63% decline in pre-tax profits as global fees tumbled by 11%.

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Although the supply side is loaded with plenty of available candidates, recruiters are facing a double-whammy on the demand side with relatively few vacancies, along with downward pressure on both temporary pay and full-time starting salaries.

The latter is a major erosion on profit margins from fees based on the remuneration of candidates successfully placed in a job. According to the latest Royal Bank Scottish Jobs report, permanent placings and temporary billings continued to fall across the country during August, leading to a fifth consecutive monthly reduction in pay across both categories.

New figures from the Jobs Recovery Tracker produced by the Recruitment and Employment Confederation (REC) suggest that relatively more difficult trend in Scotland has continued into September.

Looking at the number of new job adverts posted between the 14th and 20th of this month, the REC reported a 3% rise across the UK against the previous week to 129,000. That took the active number of job adverts to 1.21 million, up 1.8% on the previous week and the highest since lockdown began.

“Since lockdown restrictions were lifted at the beginning of June, we have seen the number of job adverts increasing steadily as the economy began its recovery,” REC chief executive Neil Carberry said.

“In recent weeks, this recovery has accelerated in the areas you would expect – education and childminding as people return to school and work, construction and logistics, and also healthcare occupations not directly related to the pandemic.”

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But within this broader picture, Scotland is having a more difficult time of it. The number of jobs advertised in this country rose by just 0.2%, the least of any UK nation and lower than any English region. Six of the REC’s 10 poorest-performing local authorities were in Scotland, led by East Lothian & Midlothian (-8.2%) and Aberdeen City & Aberdeenshire (-2.6%).

REC director Kate Shoesmith said the prospects for firms in Scotland, where there are an estimated 1,000 recruitment companies trading, depends very much on which sectors they specialise in. She noted that demand for driving and logistics personal has resurged, while construction, technology and digital skills have also rebounded.

“But all of that’s relative to the lows we saw at the start of lockdown,” she added. “None of these areas are as strong as they were at this same time last year.”

The easing of lockdown restrictions allowed many recruitment firms to bring back employees who had been placed on furlough, said Ms Shoesmith, who predicts it will be the end of end of the year before most recruiters can properly assess the impact on income and make long-term decisions on their own staffing levels.

“This is all coming at a time when Brexit is just around the corner as well,” she said. “My feeling is that a lot of employers have put their Brexit contingency plans on hold while they are dealing with the immediate reality of the pandemic, so we will have to wait and see what impact that has.”