Increasing numbers of redundancies, vacancies plummeting at a record pace and the prospect of global recession is enough to make even the most hardened recruitment stalwart wince. But as Recruiterfound out from the survivors of recessions over the past three decades, the recruitment industry is not quite ready to throw in the towel.

It may look bleak on the surface. Analysts and trade unions are reporting that thousands of global banking staff face losing their jobs. Unemployment is set to soar to 7.1% as Britain suffers the “longest and deepest recession” of the EU’s big economies, according to the European Commission.

Vacancies for permanent and temporary staff in October also hit their lowest level since records began, according to the Recruitment and Employment Confederation and KPMG’s Report on Jobs.

However, recruiters who have seen all this before say there is no need to panic.

Some recruiters are even welcoming the recession, because as Michael Squires, chairman of Sports Recruitment International, says it “clears out the cowboys” from an industry which has “far too few barriers to entry and low start-up costs”.

Ray Murphy, resourcing manager at Spring Technology, who has experienced downturns in the 1980s, 1990s and 2001, told Recruiter there isn’t a “secret elixir” to surviving the recession.

“There are some phenomenal talents in this business but it always amuses me how people try to re-invent the wheel. My motto is simple: work hard, get smart and then work harder again.”

Murphy says recruiters should buckle up for a tough downturn and warns that those who are reliant on credit could fall by the wayside. “We have not seen lines of credit withdrawn so severely since 1929,” he says. “Companies that don’t have to borrow much will survive. Those that use factoring will struggle. Those that survive on credit will burn and die.”

Murphy said nobody sat around with their feet up during the last recession. “We were definitely more insulated from the market in those days as the free flow of information just wasn’t there. Now, with live CNN and BBC reports, people are definitely more concerned and are reacting accordingly. Bluntly put, the industry was depressed then, but we didn’t feel the pain so quickly. We are truly in a recession now, as the pain is immediate.”

However, Murphy’s advice is to keep the good people in your team close and the best people closer still. “Anyone who has not experienced these market conditions before needs to get real, consolidate, get very, very smart and surround yourself with talent,” he adds.

Like Murphy, Squires, who has worked in executive search for 27 years, is convinced that the market will bounce back but recruiters have to be prepared for it. “For the good recruiter it bounces back far earlier and far better,” he told Recruiter.

“The biggest danger recruiters face is reacting too fast and harming the platform and reputation of the business, which will affect their ability to respond when the market improves.

“Concentrate on operational efficiencies, stick to what you know and work smarter.

“There will be opportunities to expand one’s product base but watch how much you’re investing.”

There are no official figures for the number of recruiters who went bust during the recession of the 1990s. Anecdotally it is 40%, but according to Kevin Barrow, partner of employment law firm Blake Lapthorn, recruiters are in a much better position this time around. For a start, there is not expected to be the same nosebleed-inducing interest rate hikes, which crippled homeowners and businesses in 1992, and banks are still lending to recruiters, “as they’re a resilient bunch”, says Barrow.

He told Recruiter that agencies would suffer “reduced numbers of transactions and reduced hiring and there will be an attack on margins and client rates”.

But Barrow says recruiters have been savvy, avoiding depending too heavily on fixed costs, like glamorous offices and expensive IT infrastructure, and lowering costs by limited high fixed salaries and operating on a ‘flex cost base’.

And the fact remains, says Barrow, that the demand for professional and technical skills will continue during a downturn because of a basic lack of skills.

Barrow predicts further consolidation of the recruitment market with PLCs being attractive propositions for a “number of opportunistic acquisitions”.

“You will also see procurement departments rationalising the supplier base,” he says. “Clients will look to take on managed service providers and RPOs, who can deliver bulk temp and contract staff at lower margins.”

Large and niche recruiters will be fine, says Barrow, as long as they are not concentrating on the dead sectors. But mid-tier recruiters could get “quite badly squeezed out of business”, he warns.

Barrow says recruiters have hedged their bets by investing in international development over the last four to six years and predicts US staffing firms will start investing in the UK recruitment market again because of the weak pound against the dollar.

Sam Newell, director of Mindpool Consulting, agrees that recruiters have had 12 months to prepare for a predicted downturn, unlike the 11 September attacks, when he saw his investment bank candidates “disappear overnight”.

Newell insists there are still growth markets, like energy and technology, to expand in and tough markets like property construction should look to move into growth markets like infrastructure or where there is still a lot of construction activity, such as Dubai.

Vacancies may be drying up, but recruiters can still capitalise by focusing their attention on the burgeoning candidate market, says Squires.

“Drill into your consultants to communicate sensitively with candidates. They could have been made redundant and it is essential they are given the utmost respect and attention because you will need them when the market picks up.”

Mark Darby, managing director of hospitality recruiter Berkeley Scott, told Recruiter that the solution to surviving the recession was not adding more staff but recruiting and retaining the best.

Darby has been in the recruitment business for 20 years and has seen the double boom and the double bust of the dotcom boom and the buoyancy of the upturn in the late 1990s.

Darby says now is not the time of the “in for a quick buck” journeymen but for the committed businessmen and women who offer flexible support to their staff and clients and best practice in terms of maximising their clients’ experiences. It is the people who stick to their strategies who will pick up marketshare, adds Darby.

“Continue to invest in your people so you have the best talent to grow your market,” he says.

Darby recalls the dark days of the 1990s recession, which were full of knee-jerk reactions, office and business closures and poor decisions.

“There was a fear factor around,” he says. There was no support for the sales teams. Things are different now. There is more motivation and support for consultants and incentives to make it a happier environment.”

Newell says in a downturn you really get to see the quality of your management, training processes and systems.

Recruiters need to be “brutally honest” with themselves and their colleagues, says Newell.

“A sales floor where everyone is ignoring what is going on around them is doomed to failure. The services your clients might need today might not be the same services that they were asking for 12 months ago,” he adds.

The final words of solace come from Kirsty Craig, chief executive of The Business Connection in the North-West and the new managing director of TEAM — a national group of independent agencies. “Recruiters must hold their nerve,” says Craig, who has been in the recruitment industry for 22 years. She warns that recruiters who cut their fees back to the bone to undercut competitors will struggle through a long and sustained recession.

However, she says recruiters should not panic at the shrinking economy and need to put things into perspective.

“Businesses still need people to function. Opportunities are still out there and the strong, resourceful and adaptable agencies that are quality driven will survive,” she says.


Craig’s top tips on how to survive and thrive

1. Ensure your team truly understands the value of customer service.

2. Stay positive and decisive, and stand firm on margins and fees.

3. Stand back and take a good look at your business and the business community around you.

4. Encourage staff to network with their candidates and clients and build on relationships.

5. Never compromise on quality.

6. Make your processes and systems more robust not less.

7. Don’t stop marketing there are always new customers.

8. Network with other agencies and share intelligence, half a fee is better than no fee at all.