Putting 2018 in the rear-view

What effect have Brexit and other factors had on the recruitment industry?

2018 was a year of uncertainty and change, not just in the recruitment industry, but across the country and matters are looking to get more unpredictable into 2019. Despite this state of unpredictability, the recruitment industry rose to the challenges that 2018 posed and the total industry turnover for 2017/2018 was £35.7 billion – an increase of 11% year on year. We have taken a look back at events that happened last year to put 2018 in the rearview and drive forward to what 2019 might hold.

Challenges in the Employment Market

The major challenge facing hirers over the past 12 months was a growing lack of readily-available candidates. This lack of candidates has affected the recruitment industry as a whole, making both temporary and permanent, skilled and non-skilled positions difficult to fill.

Low Unemployment

The skills shortage is in part down to the low unemployment rate, that hit 4% in Sept-Nov of last year (click here to see our 2018 blog about this). Plus, less permanent employees are looking to move jobs right now, thus creating a near-record number of vacancies going unfilled and talent gaps opening in skilled industries like engineering, IT, finance and legal. With more people in jobs and less availability in the marketplace, headhunting has become a much more integral part of the recruiter’s role.

Low EU Migration

In the wake of Brexit uncertainty, net migration from the EU to the UK has slumped to a 6-year low, according to the Office for National Statistics (ONS). Since the referendum, EU migrants have been leaving our shores in larger numbers, perhaps due to the lower value of the pound making it a less attractive place to work. As a result, industries like manufacturing, warehousing, hospitality, construction and farming, which rely on EU migrants for the bulk of their workforce, have struggled and continue to struggle to fill demand.

IR35 Changes

Brexit aside, the introduction of IR35 reforms (find out if IR35 applies to you) in April, also forced recruitment agencies to evolve and take on the increased responsibility for administering PAYE for specific candidates in the Public sector.

Prior to the 2018 IR35 reform changes, the focus was on contractors to evaluate their own IR35 status for each contract and deduct tax in line with this. However, the changes that were enforced on the public sector in 2019 have switched this focus to place the responsibility on the companies employing the contractors. Therefore, recruitment businesses placing contract workers with their clients now have this additional administration task to manage.

Consequences in the Employment Market

In spite of these challenges faced by recruiters, the Recruitment and Employment Confederation (REC) has revealed that as at March 2018, a total of 30,430 recruitment enterprises were registered in the UK, which is almost 10% higher than those recorded in March 2017. A growth in enterprise that signifies the ability of the industry to adapt to difficult situations and provide value added services to both businesses and candidates during challenging times.

The Rise of Permanent Placements

The majority of these new enterprise businesses have a specific focus on placing permanent candidates; growth in this area has probably been facilitated by the rise in the average permanent placement fee that increased across last year, from 14.9% to 15.4%. Additionally, starting wages for permanent staff have seen and continue to see a marked rise, due in part to the mandatory increase in the National Minimum Wage and the increasing skills shortage.

Not only have placement fees risen to cover the increasing cost of finding skilled candidates, but employers are having to try harder to hire and retain valued members of staff. Thus, temporary to permanent transfers have risen in frequency and the length of temporary placements has lengthened with 64% lasting 12 weeks or more (61% in 2016/2017). All of these factors have culminated in growth in the recruitment sector and has created a candidate driven marketplace when negotiating new terms.

Forecasts for 2019

As the UK government are yet to come to any conclusive, unifying Brexit decisions, the current state of uncertainty is going to continue for 2019 and no one can say how long for. This uncertainty will further exacerbate the lack of available candidates as those in jobs stay securely in position until Brexit comes to fruition and migration of workers from EU countries continues to decline.

There is no denying that the employment marketplace for hirers and recruiters moving into 2019 is a challenging environment. However, there is light at the end of the tunnel, Select Appointments have been here to assist businesses and candidates with recruitment for over 35 years and that is not going to change in 2019.

Whether you are a hirer or a candidate, we are here for you through deal or no deal. Get in contact with your local office today to find out more.