88 percent of small recruitment agencies are planning for growth

88 percent of small recruitment agencies are planning for growth

A recent study by 1PS Managed Growth Solutions asked 100 small recruitment businesses about their plans and priorities for the next 12-24 months.

Nearly three quarters (72%) said they were planning for steady growth, 16% rapid growth, 10% were looking to ‘stabilise’ and just 1% were planning on scaling back their business in the next two years.

‘Micro’ businesses with fewer than ten employees make up 81% of the 31,000 recruitment enterprises in the UK, according to the most recent Recruitment Industry Status Report by REC. 95% of the agencies we polled employ up to ten staff. More than two-thirds (68%) of respondents typically work with up to ten clients in a month.

Challenges and opportunities for small businesses

A lack of time to focus on strategy and dealing with too much admin were among the most cited day-to-day challenges faced by our panel of small recruitment agencies.

Ranked in order of the biggest challenges to their business, these were the top five:

  • Not enough time to focus on business strategy (41%)
  • Too much admin (33%)
  • Dealing with clients (28%)
  • Cash flow (20%)
  • Inadequate software/systems (12%)

Despite having a high volume of administrative work, almost half (46%) of the agencies we polled said they don’t use digital timesheets. 84% do have a CRM in place and 85% use accountancy software. In terms of managing cash flow, more than half of respondents have used invoice finance to help fund their recruitment business and two-thirds of those agencies currently have funding in place.

Nine out of ten respondents said they were feeling optimistic or very optimistic about their business and the recruitment industry.

“Something we often see in successful recruitment businesses is a hunger for growth, driven by knowledge, professionalism, and confidence in the service they provide clients and contractors. They want to invest in their business, their systems, and their staff to help build an agency they can be proud of. We at 1PS are delighted to support small businesses on their journey.”

Steve Jones, Director of Operations and Sales, 1PS

What does the future hold for the recruitment industry?

While the labour market appears to be buoyant, with an increase in the number of job adverts and vacancies continued through the summer of 2021, there are signs of pressure now and in the future.

The latest REC Jobs Recovery Tracker, in August 2021* revealed there were over 190,000 new job adverts posted in the week of 23-29 August 2021 – a total of 1.66 million active job adverts in the UK. The previous five weeks had seen the highest weekly figures in job adverts since mid-December 2020.

“Demand for workers remains very high across the economy and shows no signs of weakening. With businesses in the particularly squeezed food, logistics and hospitality sectors starting to gear up for Christmas, the months ahead could be difficult – even with a large number of people coming off furlough in August and September.”
Neil Carberry, Chief Executive of the REC

APSCo (Association of Professional Staffing Companies) reported on 23 August 2021 that financial services vacancies had jumped 38% quarter-on-quarter, with IT specialists most in demand.

“Our latest data shows that the recovery is well underway despite the challenges the pandemic has presented, and this is certainly echoed by our members operating within the financial services arena who are reporting huge demand for their services. While we expect to see this trend continue as we progress throughout the year, it can’t be forgotten that employers are contending with huge talent shortages which are only being exacerbated by the boom in hiring. Consequently, professional recruitment companies will have a huge part to play in assisting employers reach the talent they need to thrive and avoid hampering their recovery”. Ann Swain, chief executive of APSCo

Throughout the uncertainties of the short- and longer-term implications of Brexit, the ongoing impact of Covid-19 and the threat of staff shortages, the recruitment industry has helped to keep the labour market moving. Recruiters will continue to play a vital role post-pandemic and support clients as they continue to adapt to a changing workforce and ways of working. The next few years will not be uneventful, but there are strong signs that small agencies and the wider sector are prepared for the challenges and opportunities that lie ahead.

Download and read the full report with additional data from our panel of small recruitment business owners.

About the panel

92% of the 100 agencies we polled deal with permanent placements as well as temporary and contract (65%). They represent a wide range of industries, with clients and contractors specialising in IT, engineering, sales & marketing, financial services, banking & compliance, and accounting roles. As well as business support, education, AI, and healthcare. Half of respondents place contractors across the UK. Just over a quarter have placements overseas.

Further data from the 1PS survey of small recruitment owners is available in the full report.