Gloom the new norm for the recruitment industry

Sep 30 2002 by Print This Article

Boom times are in the past - gloom is the “new normal” for the recruitment industry

Recruitment will never again see a boom like the nineties. That was the conclusion of Simon Howard, Recruitment Society chairman and chairman of Work Communications, and Vance Kearney, vice-president HR of Oracle Corporation UK at the Recruitment Society’s September meeting.

Addressing the question ‘Doom or Gloom?’ , the speakers concluded that the dismal state of the recruitment market at the moment is only the prelude to a gloomy future for the industry. Recruitment is now a maturing industry, and consultancies are going to have to respond to permanent changes in the market.

Master of understatement, Howard depicted current conditions as “not terribly healthy.” Every survey over the last year has depicted a suffering industry: permanent vacancies in every market have fallen, press recruitment advertising is down by over 40%, and none of the top 20 consultancies is showing year on year growth. A straw poll of the audience showed that only a handful of people expect an improvement before the end of 2003. Most believe we’ll have to wait for 2004.

The £3.5 billion permanent recruitment industry has been through hard times before. But this time is different, said Howard. In the past, recruitment has suffered when unemployment, inflation and interest rates are high. This time these all remain low.

So what’s responsible for the downturn in recruitment? It’s not the internet, said Howard. In the United States online recruitment has created a national market where one never existed before. But in the UK we already had a mass of successful and established recruitment methods. Here, the challenge is to use the internet to back up traditional methods, not to create something new.

The answer lies in the industries that recruiters serve. Recruitment relies on growth and change to fuel demand – “adolescent” industries where demand outstrips supply. Over the last 10 years, industries such as car manufacturing, oil and pharmaceuticals have consolidated so that a few niche players control the market.

Recruitment is driven by sectors in flux, not by these large players in mature markets. Deregulation motored change and a booming recruitment market for financial services, for example, while privatisation of public companies created new opportunities and technological develops fuelled IT growth. “But for now almost no industries are going through such change,” said Kearney.

“The last adolescent industry died at birth – the dotcom – and recruitment is itself now a maturing industry”. The current situation of limited demand for the services of recruiters, is “the new normal”, he said.

Mature industries are characterised by an ageing staff profile, low turnover, reducing employee numbers and a high level of automation, said Kearney. None of which is good for the recruitment industry.

We’ve already seen companies disappear or make redundancies. But more are on the way, according to Kearney. “It’s inevitable that vast parts of the industry will cease to exist. A chill wind has got to blow away a lot of the smaller companies.”

Many depict the current market as a temporary blip. But those waiting for the return of the good times could be in for a long wait, said Howard. “The cake is getting smaller. All recruitment companies can do is argue over growing their slice of the cake.”