Recruitment Sector Temperature Check by Caminosearch

Recruitment Sector Temperature Check

A micro-paper exploring recruitment leaders’ sentiment towards the sector into 2025.

The Recruitment Sector’s Chosen Partner

Camino Partners has been the consulting company of choice for other recruitment companies seeking to hire sectorexperienced professionals into their nonsales teams.

Camino Partners is a specialist recruitment operation supporting both accountancy practices and other recruitment companies with their strategic hiring.

With more than three decades’ of sector experience we know the recruitment world and what great talent looks like as well as great opportunity. We’re focused on your success and will work with you to achieve it.

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The size of our network of non-sales professionals in the recruitment sector across the UK.

4,000

Placements made in the recruitment sector, with other recruitment companies since we were established.

From Our MD Edition Foreword

The recruitment industry has had a challenging couple of years impacted by macroeconomic factors often out of our control. From the hundreds of conversations I’ve had this year with representatives across our sector, it feels that 2024 was a bit of a ‘false start’.

In our first market micro paper ‘Outlook 2024’, we anticipated a recovery for the sector in H2. There have been some ‘green shoots’ but the energetic recovery we hoped for hasn’t happened for all businesses and there is still a cautionary feeling amongst most recruitment leaders.

This is clearly reflected in the data for our second micro paper: this publication.

We have compiled a temperature check survey to 150 recruitment leaders over Q4, to understand how their ‘feeling’ about their businesses performance as we edge into a new year and close off 2024.

The data in this report suggests a reasonable confidence in stability in the recruitment market but it’s clear that there are few stand out performances.

Many recruitment leaders we spoke with run recruitment businesses that recruit globally and are not only dependent on the UK. Part of the challenge in 2024 was to get multiple geographical markets performing well at the same time. A change in both domestic and foreign governments and their respective policies will start to have an impact.

Particularly, the UK’s new government in their budget announced changes to employees’ rights and a rise in national insurance on the employer which are expected to have a negative impact for recruiters. However, with a substantial increase in Government spending in 2025, hopefully we will all see a more buoyant jobs market in the UK driven by a ‘feel good’ factor.

The change in US government will undoubtedly affect markets worldwide when Donald Trump returns in January.

Trump’s promise of tax cuts would lead us to believe that his administration will be more business friendly than his predecessor though his assertion that he will increase tariffs 10-20% on all imports will significantly raise inflation and costs for US businesses whilst a curb on immigration will likely have a great impact on accessibility to hire foreign workers.

All of this activity is reflected in the data demonstrated in this report.

It’s clear that the majority of recruitment companies we approached expect that the sector will experience hiring growth in 2025 and the sector is recovering, although with a certain element of caution against the backdrop of geo-political change.

As we move into 2025, economic experts are saying there are certainly better times expected and the optimism for hiring trends in 2025 amongst recruitment leaders exists.

Matt Newman Managing Director, Camino Partners

The Editor Would Like to Thank:

We would not have been able to produce this micro paper without the support and expertise from:

EDITION OVERVIEW

Data

| SIX

Building Up The Market Insight

Approaching the market to construct the report.

| SEVEN

The Responder Demographic

Breaking down the data by leadership position responder type

| EIGHT

Sector Confidence Rated Out Of Five

A graphical representation of how leaders would score the strength of the market, ‘out of five’

| NINE

Sector Confidence By Business Size

How leaders feel the market is performing right now in terms of sector confidence

| TEN

Headcount Forecast Demographic

An overview of how recruitment companies will be recruiting by headcount type in to 2025.

| ELEVEN Consultant Vs Support Team Hiring Split

Front office versus support staff recruitment aspirations by company sizes in 2025, based on current business confidence.

| TWELVE

Overall Quarterly Growth Split

When will recruitment companies be hiring in 2025, by quarter?

| THIRTEEN

Leaders’ Hiring Confidence By Business Size

Leaders’ expected hiring trends by company size in 2025, in both front office and non-sales roles.

| FOURTEEN

Permanent Recruitment Confidence

An overview of recruitment leaders’ sentiment towards permanent performance, holistically and by company size.

| SIXTEEN

Interim Recruitment Confidence

An overview of recruitment leaders’ sentiment towards interim performance, holistically and by company size.

Thoughts

| EIGHTEEN

Adapting To A Dynamic Recruitment Market

RSM UK’s Partner and Head of Recruitment Sector, Neil Thomas, shares his thoughts on how the sector is performing into 2025

| TWENTY M&A Confidence Into 2025

Sohail Ahmad of Azlan Advisory, outlines the appetite for recruitment M&A activity based on the current climate.

| TWENTY TWO

Afterword: 2025. A Year For Green Shoots?

Group Finance Director, Rob Slaney, suggests 2025 might be the year recruitment leaders are hoping for.

Whilst 2024 has been a challenging year for UK recruiters, there is cautious optimism for a steady increase in activity in 2025.

NEIL THOMAS PARTNER AND HEAD OF RECRUITMENT SECTOR, RSM UK

Inset picture: Consultants speaking to CEOs and CFOs about the market sentiment to compile the report. Camino Partners’ consultants gathered the data for this survey by targeting 150 recruitment leaders within our CRM system at random. The survey was carried out by seven consultants in early Q4 of 2024, during consultants’ business development calls. Responses were taken anonymously and tracked to create insights for this report.

HOW WE GOT HERE BUILDING UP THE MARKET INSIGHT

Our consulting team spoke to recruitment leaders at CEO/MD level to invite their insights into how they ‘felt’ their recruitment business was performing against expectations in their initial business plan.

In the absence of being able to contact a CEO or MD, consultants approached financial decision-makers at CFO or financial leadership level, or at Non-Executive Director (NED) level.

The results of their conversations were logged and mapped by the

Camino Partners’ marketing team to form the data outputs within this report. The survey was conducted between October and November, 2024. A demographic breakdown of responder split can be found on the opposing page. Our team directed focus at recruitment

companies across London and the ‘Home Counties’ area of the sector to ensure a concentrated demographic within, or around the periphery of the M25. Recruitment companies outside of this area have been deducted from the data sets before compiling the results.

CONTACT POINTS THE RESPONDER DEMOGRAPHIC

The below breaks down, by percentage, the type of recruitment leaders surveyed in this micro paper. More than half those surveyed were at CEO level in the business. The CEO bracket includes Managing Directors and ‘number one’ positions within the company. In the minority, consultants also spoke to Non-Exec Directors. No businesses were approached on more than one occasion (I.E.: one response represents one singular recruitment business.

55%

Chief Executive Officers

43%

Chief Financial Officers

Non-Exec Directors

RESPONDERS’ RATIOS BY BUSINESS HEADCOUNT

Responders’ business headcount and breakdown of response percentage. Businesses were surveyed across a variety of headcount sizes, with results segmented by headcount size throughout the report.

67% RATED OUT OF FIVE SECTOR CONFIDENCE

Of recruitment leaders would score their confidence in the sector 3 out of 5, or above. Confidence is slightly more heavily weighted to higher scoring in confidence based on those responding.

THREE 42%

ONE 5% TWO 23%

FIVE 3%

FOUR 32%

SECTOR CONFIDENCE BY BUSINESS SIZE

SENTIMENT VALUE

COMMENT

The graphic portrays how recruitment leaders would rate general sector performance in recruitment, right now, based on their own business performance. Graphics are geared to business size.

HEADCOUNT FORECAST

HEADCOUNT GROWTH EXPECTATIONS

Encouragingly, a large proportion of recruitment companies are expecting to grow their operatiions in 2025, based on the confidence in their respective sectors. All categories that responded to the survey do anticipate a form of growth in their businesses - none of the responders who spoke with our research team suggested that their business would avoid growth in 2025, with hiring happening in either the front office - consultants, or the back office, or both. Most businesses expect to grow around 20% based on responders.

33% 86%

Of recruitment leaders anticipate some form of growth in their businesses in 2025.

COMMENT

Overall, companies, are expecting growth in their consulting functions, with three-quarters of those responding suggesting growth by headcount, in this segment of the business.

THE SPLIT

BACK OFFICE VERSUS FRONT OFFICE HIRING RATIOS BY COMPANY HEADCOUNT

Both Functions Consultants

Non Sales

There is a distinct disproportion between the hiring trends in the sector, based on responders’ confidence in the market. All companies expect to be hiring in their consulting functions, whilst the requirement for support function, alone, personnel remains cautious. A large proportion of businesses expect no hires at all into 2025.

Recruitment leaders are expecting a hiring focus in the early stages of 2025, likely to set up their operations for market demand into the latter stages of the year. In Q1 and Q2 (H1) almost half of those responding to the engagement survey will be hiring in their front office and/or support functions. However, more than one-fifth of those responding suggest no headcount growth is expected in their operation in 2025.

HALF-YEARLY HIRING

LEADERS’ HIRING CONFIDENCE IN 2025 BASED ON HOW THEIR BUSINESSES HAVE PERFORMED IN 2024.

The below represents how recruitment will be hiring in their consulting and support functions based on their current sentiments of their companies’ performance in 2024*.

*Editor’s note: companies may hire in H1 and H2, so charts will not add up to 100%.

SENTIMENT VALUE

Not Hiring in 2025

Hiring in H1

Hiring in H2

COMMENT

At both a high level and by company headcount size, the trend suggests recruitment companies expect to be hiring in H1 of 2025, based on their current confidence in the market.

Generally speaking, the hiring confidence appears stronger in smaller recruitment companies, which are expected to expand their headcount in the first half of the year. A sizable portion of companies at the larger end of the market (120 + heads) appear to be less likely to hire in 2025.

DIVISION OVERVIEW PERM PERFORMANCE

Recruitment leaders are reporting very mixed performances for their permanent divisions. More than a quarter of responders suggest that the sector is reporting poor results for perm performance, versus 17% of responses suggesting a strong performance. Overall reporting from the results suggests a low level of confidence.

26% Poorly 11% No Perm Division* 17% Strong 46% Okay

Editor’s note: About 10% of responders don’t have a permanent division and were filtered out of the results. Responders were asked how they’d rate the performance of their perm division versus business expectation for the year.

PERMANENT PERFORMANCE BY SIZE

How do recruitment leaders think their permanent divisions have performed against the expectation in 2024?

0/20 HEADS 21/40 HEADS 41/80 HEADS 81/99 HEADS

HEADS 121/150 HEADS 151/180 HEADS

SENTIMENT VALUE

COMMENT

Companies of all sizes are edging towards more of an ‘okay’ [stable] set of performances amongst their permanent divisions but results suggest an indecisive lean towards either a strong or weak performance in the sector. The average trend across permanent performance across the sector suggests it’s slightly better than ‘okay’, against leaders’ expectation.

INTERIM PERFORMANCE BUSINESS CONFIDENCE

Where surveyed recruitment leaders’ responses suggested that interim was edging more towards a ‘stronger’ than weaker performance in 2024. However almost half the responses across all responders suggested that interim divisions we performing ‘okay’[stable].

16% Poorly

13% No Interim Division*

24% Strong 47% Okay

Editor’s note: A small percentage of responders don’t have interim divisions within their businesses. These businesses have been removed from the final data sets being summation.

INTERIM PERFORMANCE BY SIZE

How do recruitment leaders think their interim and contract recruitment divisions have performed against expectation in 2024?

0/20 HEADS 21/40 HEADS 41/80 HEADS 81/99 HEADS 100/120 HEADS 121/150 HEADS 151/180 HEADS

SENTIMENT VALUE

COMMENT

As with permanent performance, it would appear that recruitment leaders were reluctant to suggest that there were stand out performances from the sector in terms of interim confidence..

ADAPTING TO A DYNAMIC RECRUITMENT MARKET

BY NEIL THOMAS, PARTNER

AND HEAD OF RECRUITMENT SECTOR, RSM UK

As we reflect on the recruitment sector landscape of 2024, it’s clear that the year has been marked by a series of challenges, but there is cautious optimism for the year ahead.

Recruiters have generally experienced a stop-start year in the face of demographic and economic factors. The end of the post-COVID hiring boom and the related wage inflation preceding the year have left many businesses managing headcount and reshaping their cost base amidst the cost-of-living crisis. Off the back of this, there was an air of optimism in Q1 and there have been some ‘false dawns’, but these were largely offset by sticky inflation in H1, resulting in slower-than-hoped interest rate reductions, uncertainty around an unexpectedly early UK election and then a ‘nervous’ three month wait for the Budget. Understandably, these factors collectively impacted on employer confidence and their hiring appetite throughout the year. Despite these challenges, there is some cautious hope for a steady increase

in activity for 2025, but certainly no expectation of a bounce. This is despite headwinds, such as the National Insurance Contributions (NIC) increases outlined in the Budget and aspects of the Employment Bill, that will inevitably influence strategic shifts in pricing and employee engagement.

So, what do we see as areas of focus for recruiters as we head into 2025?

Effective data governance and management for reporting, business management, and recruitment decisions will be key and add enhanced value to the business. Leveraging advanced analytics to provide deeper insights into market trends, candidate behaviours, and performance metrics will create further insight for more strategic decisions. This may include diversification into growth verticals.

“”

Whilst 2024 has been a challenging year for UK recruiters, there is cautious optimism for a steady increase in activity in 2025.

NEIL THOMAS PARTNER AND HEAD OF RECRUITMENT SECTOR, RSM UK

Whilst digital advancement, including the use of AI, will be a strategic priority for most, if not all, businesses, the quality of client and candidate relationships will always be key, particularly in a difficult market. Community initiatives and events to increase engagement, strengthen relationships and foster loyalty will position a recruiter as a valuable partner. Shifting revenue models towards project-based engagements, from statement of works to full consultancy, with improved margins and reduced IR35 risk, will strengthen relationships with clients seeking specialist support. Investment in optimising existing fee-earner output as opposed to increasing headcount, including fully understanding why certain consultants out-perform their peers, will enable training and upskilling of others, and together with the strategic use of digital and AI tools, will increase efficiency and effectiveness. Alongside this, we envisage a continued shift away from hybrid working for more in office collaboration to encourage teamwork, creativity, and innovation. In the face of demographic challenges, there will be a continued need to review pricing structures

whilst balancing cost management with internal investment. An obvious example is the forthcoming NIC increases which are expected to result in more effective offshore outsourcing of support activities. As part of this cost equation, supply chain compliance remains under scrutiny from HMRC, as evidenced by the Budget announcement of agencies’ PAYE responsibility for temporary workers, so investment in robust management practices will continue to be imperative. Strategic acquisitions, including small and/or distressed ‘bolt-ons’ will continue to supplement organic growth. Many of our recruitment clients are interested to know about owners looking to exit and in the light of what’s been a difficult couple of years impacting on EBITDA for most, there can be value in the market.

In summary, it’s clear that 2024 has presented challenges for the sector. However, some of the demographic factors previously outlined are now behind us and, having navigated their way through these difficulties, recruiters are generally well prepared for what will hopefully be a steady upturn in the market during 2025.

RSM UK specialises in working with employment businesses and recruitment agencies. For more information, visit rsmuk. com or scan the QR code with your mobile device.

SOHAIL AHMAD AZLAN ADVISORY

Let me tell you something you already know...

Despite persistent macro-economic and geopolitical challenges, stakeholders in UK recruitment sector M&A embarked on 2024 with a sense of growing confidence and optimism. Positive tailwinds battled cautionary headwinds, the latter appearing to have gained the upper hand as tough trading conditions characterised Q1 with a number of false starts as sellers struggled to forecast target earnings and buyers grappled to price risk.

The world ain’t all sunshine and rainbows…

With deals completing in Q2 against a backdrop of inflationary pressures, high interest rates, pre-election uncertainty and geopolitical concerns, headlines anticipating subdued dealmaking proved to have been unfounded with deal volumes appearing resilient.

Those firms and acquirers that remained strong through the preceding period underpinned an uptick in activity. Although full year volumes are on course to conclude in line with 2023 activity levels (at circa 15 UK deals per quarter), a nuance of a noteworthy proportion of the completions in 2024 has been the driver behind those deals - the reality, unsurprisingly perhaps, is that several transactions were required due to financial difficulties or vendors acting with urgency to transact before an anticipated increase in capital gains tax (including a flurry of debt funded value realisations to employee ownership trusts).

THE M&A OPINION

But it ain’t about how hard you hit…

More conventional sell side rationale saw business owners partnering with large corporates, these strategic combinations seeking to re-ignite or accelerate growth with active acquirer support. Notwithstanding the recent bias in favour of strategic buyers, the wheels of private equity kept turning, investors proceeding with caution targeting businesses with strong management teams, high revenue visibility, effective adoption of technology and a developed data strategy; as well as a focus on existing portfolio companies through bolt-on opportunities. The flight to specialism continued with high growth sectors or those facing severe candidate shortages being of sustained interest to the buyer community - niche technology and education being particularly active markets. Strong performing assets attracted a scarcity premium, a notable example being the sale of Linksap Europe to HIG Capital backed US corporate Oxford Global.

“As we wind down on 2024 and look towards 2025, improving macro-economic conditions, political certainty and easing of borrowing costs has started to proliferate views towards a more bullish M&A outlook”

US are yet to be fully understood.

Buyers, with their own performance improving and the impetus to achieve enhanced growth, will see a value opportunity for high quality assets that are rebuilding their growth profile.

The energy and optimism from recruitment business leaders defines the sector - confidence is growing across the industry in tandem with activity levels.

It’s about how hard you can get hit and keep moving forward...

The overarching theme this year has been the deals that did not take place- with subdued growth and exit momentum, sale plans and processes have been paused. Executive teams have capitalised on the time and bandwidth available to strategically review, refocus or streamline their businesses which is anticipated to result in an increased number of attractive assets that have demonstrated resilience against a challenging backdrop coming to market in the short to medium term.

That’s how winning is done...

As we wind down on 2024 and look towards 2025, improving macroeconomic conditions, political certainty and easing of borrowing costs have started to proliferate views towards a more bullish M&A outlook and are translating to momentum in dealflow. There is caution however as despite potential amelioration in EU trading relations, future trading relations with the

To optimise transaction security, sellers will need to focus on the narrative for a compelling story of growth and the future of their business.

Time to prepare will be crucial, not least to manage the scrutiny that is prompting lengthier and at times forensic diligence processes.

The expectations of buyers and sellers are coming closer together creating new opportunities.

Vendors and acquirers will need to be pragmatic on pricing to reflect the latent potential high-quality businesses have built and the risk acquirers are undertaking - creative deal structuring will be required to appropriately share that upside and risk.

Azlan Advisory provides M&A, strategic and financial advice to shareholders, boards, investors and lenders in the recruitment sector.

AFTERWORD

2025: A YEAR FOR ‘GREEN SHOOTS’?

Rob Slaney, experienced Group Finance Director from the recruitment technology sector, shares his final thoughts on market confidence in recruitment, moving into 2024.

The recruitment market in 2024 started in challenging circumstances, in the UK, Europe and US, with the cost-of-living crisis and political uncertainty contributing to the slowing down of investment in new projects.

The majority of organisations struggled to hire as rising salary expectations and candidates being more selective partly due to the economic backdrop. Throughout the year, as the uncertainty receded, there has been a noticeable upward trend with budgets being approved and hiring requirements released, with Q4 showing early signs of recovery.

The confidence within the market is gathering momentum into 2025, for example, with the technology market forecasting an increase of over 60% in IT budgets leading to a 10% global increase in overall IT spend from 2024 with macroeconomic conditions and technological advances, most notable IT spending on security and AI contributing towards this growth.

This upward move is expected to stimulate the contract recruitment market with permanent hires expected to follow afterwards with 40% of IT professionals planning on a new job leading to steady growth throughout 2025.

From a technology recruiter’s perspective, this sentiment of increased revenues will create opportunities to build sales

headcount in line with the demand, particularly in the US, and widen relationships with new and existing customers.

Readers will note from Sohail’s piece earlier in the publication, from an M&A perspective, the outlook is one of cautious optimism for increases in activity as the decrease in global inflation and reducing costs of borrowing will stimulate appetite for companies with customer penetration in the IT markets focussed on the Security, AI, cloud and computing businesses, alongside green technologies, as the industry adopts the advances in technologies.

The UK remains one of the leading technology recruitment markets and with an increase in consumer demand coupled with competitive candidate expectations, the outlook looks positive for 2025.

Exploring the Camino Partners’ data in this report [P12], there’s some confidence that the recruitment sector could look forward to ‘green shoots’ of growth as recruitment leaders appear to anticipate headcount growth in their respective organisations.

Rob Slaney is a CIMA qualified finance professional with 15 years’ experience of financial leadership in the recruitment sector.