Its analysis of insolvency disclosures has found as many as 120 recruitment businesses have appointed liquidators in the past six months, a jump of 17% compared to last year and the highest rate since the financial crash, said the CityAM report.

The number of recruitment agency closures indicates a major nationwide slowdown in hiring, “often viewed as a precursor to a recession”, said the report. It could also be a sign businesses are seeking to make their workforces leaner as they brace for the burden of higher employment taxes and minimum wage rates unveiled in Chancellor Rachel Reeves’ budget last year.

The source of the figures and the precise timings of the insolvencies were unclear. Recruiter has contacted CityAM.

Speaking at the CBI’s annual conference last November, CBI chief Rain Newton-Smith suggested businesses across many sectors were “being hit by a tough trading environment that just got tougher” due to changes in National Insurance contributions (NICs) and inheritance tax.

And mirroring the insolvency news, tax rises in the Budget have made it more difficult for firms to “take a chance” on hiring people, Newton-Smith said at the conference.

Earlier in the year, global recruitment company Hays became the latest recruiter to highlight the severity of the market challenges after reporting a 13% slump in UK fees in the first quarter of the year, a steeper drop than that seen in Germany (9%), Australia and New Zealand (11%) and its other global markets (7%). UK staffing firm PageGroup also reported a fall in gross profit, while Robert Walters also recently reported a decline in net fee income.

Conversely, both Staffline and Gattaca recruiters have bucked the downward trend, posting increased revenues and “robust” financial performances, so the picture may not look as gloomy as predicted by the insolvency figures.

Neil Carberry, CEO at the Recruitment & Employment Confederation (REC), told Recruiter: “Recruiters and the recruitment sector have repeatedly demonstrated their ability to bounce back from challenging times – and they will again. But this prolonged period of political uncertainty and sluggish UK economic growth is particularly tough, with profit margins squeezed longer than many anticipated. 

“When the market returns, it will look different from before, but the sector will continue to offer a wealth of job opportunities. Recruitment is a major industry, dynamic, adaptable, and quick to embrace change, as seen in its adoption of AI. Some areas, such as construction and IT, are already showing stronger performance.”

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