Covid-19 & Its Toll On Recruitment Industry Finances
Clearly, businesses everywhere have experienced disruption from the coronavirus. But the impact on the recruitment industry has been particularly significant. After all, it’s a people-focused business, not one intended to be conducted at a 2m distance.
It’s a sector that had seen steady growth over the last five years, with the market valued at nearly £39bn last year, as the UK enjoyed low unemployment. But recent figures have shown the sharpest decline in the industry since the 2008 crash, as unemployment is expected to rise this quarter to levels not seen since 1983 and claims for Universal Credit have soared 910%.
Many organisations have had to downsize, close completely, lay off staff, reduce employees’ hours, or are using the government’s Job Retention Scheme (furloughing). In many cases, start dates for new hires have been delayed. Organisations including travel operator TUI have understandably frozen recruitment completely.
So while a 2019-2021 growth prediction of 3 to 6% for the industry was made in recent months, the picture now looks very different.
Tough on agencies
Agencies in particular risk a lengthy wait before employers start to outsource the recruiting process again. This can bring particular financial difficulties. Not least the drop in income but also, as activity returns, cash flow issues as an agency may have to pay a placed employee’s wages at the end of a working week, but not be reimbursed until the end of the month by the client.
Additionally, agencies need to be aware of organisations such as GRI, which operate between agencies and end clients and impose strict trading terms on outsourced recruitment solutions, which in turn can have an impact on their ability to secure funding. GRI can be a huge issue for those agencies that utilise Invoice Finance for their working capital as many lenders have challenges due to the nature of the contracts and also securing bad debt protection where GRI feature.
A survey of 300 industry professionals conducted in April by performance marketing specialists Talent Nexus and others found that more than half (55%) of agencies had either made or were considering redundancies, while only 9% of in-house recruiters had already cut jobs.
There were similar discrepancies when it came to issues including reduced working hours, salary cuts and furloughed staff.
Recruitment in numbers
Between February and March 2020, according to the Covid-19 REC jobs outlook survey, employer confidence plummeted by more than 20 percentage points, although short-term demand for temps rose by 15 percentage points.
Of course, the outlook isn’t universally bleak. While retail, leisure and hospitality work all but ground to a halt overnight, with 46% of staff in those areas expected to be furloughed, demand for staff in supermarkets, pharmaceutical, medical professions, food production, cleaning and delivery soared.
Some areas of fintech and tech are also currently highly sought-after, as are those in delivery, logistics and company restructuring, alongside anyone supporting and enabling home schooling or remote working.
What about the longer term?
Of course, no one knows for sure how or when this crisis will end. But a swift return to a working life that’s exactly the same as it was pre-Covid seems a remote possibility. Some form of change is likely to be with us for the long haul, possibly permanently. Recruiters, like everyone else are having to adapt.
That could mean greater (and better) use of recruitment technology, more online interviews, more home-based working, more temporary contracts and smaller hiring budgets.
At the same time, however, the UK’s recruitment sector is strong and resilient, so it stands an excellent chance of making an effective comeback.
How we can help
At Invoice Finance Connect, we can help your recruitment business in the short and long term, so that you continue to thrive throughout this crisis and ride out any immediate financial issues, while also being poised to return to maximum capacity as soon as possible.
This also includes assisting those agencies where GRI feature as a customer, each lender will have their own approach, however there are Invoice Financiers out there that will fund this debtor and of course we use our experience to match the financial needs of the agency with the right funding partner.
We have many years’ experience working with recruiters, and offer numerous different solutions from invoice discounting, factoring to bad debt protection. We can even help you improve any deal you may already have in place with an invoice finance provider. Whatever your particular needs or situation, get in touch today to learn how we could help – we’ll discuss your options for adapting to these challenging times.