Recruiters are facing a more competitive year in 2007, according to Plimsoll’s Portfolio Analysis of Recruitment Agencies.

Plimsoll says that while growth was a healthy 10% in 2006, well above inflation, a third of the of the 1,000 companies it monitored saw a fall in sales. This indicates that much of the growth is being shared by a select band of firms. The effect has been that the industry has begun heading in a new direction, and the companies which have found themselves lagging behind have been slow to recognise this, says the report.

Senior analyst David Pattison says: “I see growth slowing in the coming 12 months although still above 5%, with the small group of market leaders again capturing the lion’s share and the others increasingly playing catch-up.

“Overall margins in 2006 were 2.8%, with some companies enjoying a record 20% or more. But I believe these margins will be squeezed in 2007, and at least a third of companies in the sector will lose money.”

The report notes the number of newly appointed directors during the year. In the past 18 months, 439 have taken up new posts, it forecasts increased competition in 2007 as they start to have an impact on company performance.

The report found salaries in the industry have risen again, and the average now sits at  £33,500 - up 2% on the previous 12 months. It finds this has largely been productivity driven, with sales per employee increasing from £190,700 to £192,900.