Attempts to beat the downturn by diversifying into new areas of your core market or new sectors aren’t the panacea they first appear, recruiters have warned.

Recruiters have already switched resources from hard hit areas such as investment banking and insurance into areas such as risk and compliance (see recruiter. co.uk, 22 December 2008).

However, Robert Thesiger, chief executive of finance recruiter Imprint, parent of Morgan McKinley, told Recruiter: “I am a big fan of diversification, but it doesn’t stand to reason that because one part of the business is very quiet, you will do well in another part of the market.

“It’s got to be done for the right reasons rather than at the expense of your core business. If it’s a knee jerk reaction then it’s almost certainly the wrong thing to do. If it’s for the long term and not at the expense of your core business, it’s probably right.”

Thesiger said recruiters looking to diversify their business often overlooked the need to build a new client base from scratch.

“You end up with double the cost base and no increase in your revenue,” he said, adding: “It’s much harder to diversify in poor markets.”
Recruiters should heed the warnings from the past, Thesiger warned. “When the dot.com bubble burst, IT recruiters spent nine months, and a lot of money, building up finance divisions, but once IT picked up they went back to IT.”

Nigel Peaker, divisional manager at medical recruiter Lifeline Personnel, told Recruiter he had “definitely noticed” more high street and generalist agencies looking to enter the healthcare sector.

However, Richard Mac - Millan, chief executive of healthcare recruiter Pulse, warned: “There are much higher barriers to entry than in other areas of recruitment.”

MacMillan told Recruiter: “The number of checks you have to do is completely different to those required of general staffing companies.” These include Criminal Records Bureau checks, occupational health requirements, references and professional indemnity checks.

“This process can take three months for an individual candidate,” he added. “You can’t just jump into this sector as you can in other parts of the recruitment industry.” MacMillan said that for these reasons he wasn’t worried about staffing companies entering the sector.