A downward trend in the number of recruitment agencies being placed into the hands of administrators continued through the second half of 2010.

In the fourth quarter of 2010, 13 recruitment agencies went into administration, compared to nine in the previous quarter and 18 during the same period in the previous year — a year-on-year drop of 28%.

However, recruiters need to remain vigilant and consider what they would do if their client base gets into problems, according to administrators. David Grier, partner at corporate restructuring and insolvency firm MCR, told Recruiter: “In our view, recruitment businesses would be well advised to consider how they would respond to a ‘worst case scenario’.”

Grier recommended recruiters consider the following:

·     Consultant numbers may have to be reduced and even branch closures may be necessary, but when and where? What are the related human resource issues?

·     The burden of rents may have to be reduced, but how best to get commercial landlords on side?

·     Arrears of taxes such as PAYE and VAT may have accumulated rapidly as cash flow has inexorably tightened, but how best to negotiate with HMRC?

·     If management accounts reveal poor results, what is the best way to manage an anxious bank and to ensure continuity of vital funding?

Simon Plant, group partner at corporate recovery and turnaround specialist SFP Group, told Recruiter: “If your business is facing any financial issues, our advice would be to consult with accountants or business advisors almost immediately. Dealing with problems the moment they arise provides the best opportunity to avoid potential business failures.”

For a complete list of the companies that went into administration in Q4 2010 and further analysis of the problems causing businesses to become distressed see the 9 February edition of Recruiter.