2009 is proving to be another demanding year for the recruitment sector.

While there are some indications that a recovery is on the horizon offering a glimmer of hope for recruiters, Edward Winterton, Bibby Financial Services’ recruitment finance specialist offers a word of warning and gives his view of the current state of play.

The speed and ferocity of the economic downturn came as a nasty surprise to many in the recruitment industry. After many years of consistent growth, the sheer size and scale of the unprecedented global slowdown came as a big shock to a significant number of recruitment professionals who had never experienced anything other than business growth.

While it would be foolish to claim we are without a doubt over the worst of the recession, there are some good signs that the UK economy is on the up.

In June the Pound rose to its highest value since December 2008 against both the Euro and the dollar at €1.17 and $1.6350 respectively. And in the property market, the most recent report issued by the Royal Institute of Chartered Surveyors (RICS) 1 documented an increase of 25.7 points – its largest rise since September 2007.

The recruitment industry itself is reporting a more positive outlook. In fact, a recent joint report from the Recruitment and Employment Confederation (REC) and KPMG found that permanent placements in June fell at their slowest rate for over a year. Similarly, temporary/contract staff billings declined at the slowest rate since last September.

It would appear that beyond all expectations, the UK jobs market is showing signs of life. The REC makes the point that this appears to be driven in part by the public sector which has continued to recruit as well as the rise in demand for temporary and contract staff.

However, if the first green shoots of recovery are to take root, it is clear that demand needs to return to the somewhat beleaguered private sector to ensure the UK jobs market experiences a sustained recovery to its former glory.

Many industry experts warn that it is still far too early to talk about a revitalisation of the UK jobs market. In fact, some of the improvements could be driven by the fact that employers are asking staff to work reduced hours for lower pay instead of embarking on aggressive and costly redundancy programmes. Quite rightly, many employers are making the sound decision to try and retain the skills and knowledge within the workforce – essential if businesses are to make the most of the significant opportunities which will come their way when the upturn does eventually come.

Caution should be the name of the game within the recruitment sector as we take the first tentative steps towards economic recovery. As with any economic ebb and flow, change takes time to filter through the innumerable cracks and crannies of UK industry. And any claims that the recession is now fully relinquishing its hold on UK businesses should be regarded with care.

For every positive economic statistic there is a corresponding negative figure lurking. That said from here on in the only way is up – as long as the right measures are introduced from the outset.

Never has it been more important that recruitment firms work to keep costs under control and ensure credit management processes are robust and watertight. Cash is king and a healthy flow of funds should be the number one priority.

It goes without saying that the banks have had their fingers burnt by the global downturn and they have a long road to recovery ahead. Alternative cash flow solutions such as factoring and invoice discounting can plug the funding gap left by the banks providing a fast, flexible source of finance that grows in line with business. And dedicated recruitment finance packages, such as those offered by Bibby Financial Services incorporate invoicing, funding, collection and payroll services which allow businesses to retain an immediate and ongoing supply of working capital.

Online timesheets for temporary workers, combined with a chaser service for both these and outstanding invoices, are broadly available. Unique to Bibby Financial Services’ however, is access to information such as candidate details and gross margins at the touch of a button.

And it is this amalgamation of invoicing collections services with payroll, which can otherwise drain up to two whole days from the middle of the working week, that leaves recruiters free to concentrate on what they do best.

The cyclic nature of the world economy means downturns are a fact of life. Recruiters who have never experienced recessionary pressures are learning valuable lessons in how to cope with a slowdown. While painful, this experience will ensure more robust business models for the future where cash flow measures and alternative funding options are at the fore. This has to be a good thing for the sector as a whole. And while we may not be out of the woods yet it would appear the horizon is at last beginning to clear.

1 www.rics.org
2 www.niesr.ac.uk
3 Office for National Statistics
4 Research was conducted on behalf of Bibby Financial Services by Continental Research among 301 owners or managers of small and medium sized businesses (i.e. businesses with a turnover between £50,000 and £1m) across the UK between 2 and 6 February 2009

Contributed by Edward Winterton, Bibby Financial Services’ recruitment finance specialist

www.bibbyfinancialservices.com