Outlook for recruiters remains uncertain

The uncertain economic outlook is causing problems for all manner of UK businesses across a range of sectors, but some are struggling more than others.

The recruitment industry is one that seems to have been hit particularly hard by sluggish growth and reduced confidence, with a number of companies entering administration in recent months.

Fortunately for some, quick action by corporate recovery and business turnaround specialists like SFP Group has led to a successful outcome.

Arnashade Recruitment Ltd was one such firm. The group went into administration after accruing debts of more than £600,000 owned to HM Revenue and Customs.

It appointed SFP's Simon and Daniel Plant in July this year, who were able to oversee the sale of the company as a going concern to Staffline Group after just one week.

As a result of the deal, all permanent staff members were able to keep their jobs, and the future looked bright for temporary workers as well.

A number of success stories have since followed, including the sale of Nottingham-based Key Personnel Group to a third party at the beginning of August.

But the pressures on recruitment companies remain, and concerns over the economy are only leading to a more uncertain future.

"Keeping a close eye on finances is imperative for many businesses in recruitment right now as failing to do so can impact on survival," explained SFP partner Daniel Plant.

The latest Jobs Outlook by the Recruitment and Employment Confederation (REC) highlights the need for caution in the months ahead.

The report showed that continuing fragility in the UK economy has prompted employers to downgrade their plans to hire more permanent employees, both on the medium term and over the long term.

Only 67 per cent of employers had intentions in August to increase their permanent workforce over the next three months, compared to 74 per cent in July.

Looking further ahead, just 49 per cent of companies said they plan to make more permanent staff apportionments over the next 12 months, compared to 66 per cent a month earlier.

This doesn't mean the remainder are planning to make job cuts. In fact, some 42 per cent of those questioned in August said the intended to keep staffing levels the same.

Unfortunately for recruitment companies, this means less business, which could have serious consequences for those already struggling.

Public sector spending cuts are also expected to bite in the months ahead, dealing a further blow to the recruitment industry.

A fifth of private sector employers said the cuts will have a "quite serious" or "very serious" impact on their operations.

Commenting on the latest data, Roger Tweedy, the REC's director of research said: "The fact that employers have reviewed their permanent hiring intentions this month is clearly a reflection of the uncertain economic context."

For recruitment firms concerned about the future, the advice from SFP Group is to make cashflow a number one priority.

Daniel Plant explained: "It remains crucial that businesses don't lose sight of their finances or let their cash flow become tied up."