Written by John Bisell
The cost of living crisis has flattened growth in the UK economy and there are signs that it may now be having a detrimental effect on the recruitment industry. I’m increasingly hearing that permanent placements have declined and that the rapid growth many saw in temporary placements, over the last 12 months, has at best plateaued and in some cases slowed.
Not all recruiters are facing worsening trading conditions, but many are. Faced with lower sales there is a temptation to reduce margins to attract new business. In my opinion this is a mistake. UK recruitment margins have always been low by international standards. It has seemed that there has always been a recruiter prepared to reduce margins to win business. The rise of neutral and master vendors has exacerbated the problem creating a downward spiral in margins across many sectors. UK margins remain low, even though there are now major skill shortages in the economy. Some recruiters have been slow to raise their rates to match the higher wages that they are having to pay their temporary staff and their net profit margins have plummeted as a result. This is not the time to be shy about rate increases.
‘Turnover is vanity, but profit is sanity’ is the old saying and it has never been truer than it is now. It’s not about making sales, it’s all about making a profit. If you are having to increase pay rates to attract staff, don’t wait until the year end to increase your rates. Do it now. You may lose some clients, but what is the point of selling to them if you make no profit on the contract. Sell on quality, not on price.
