Getting growth right in the recruitment industry

By Kim Collins, Relationship Director at Lloyds Bank

Growth is definitely the word of the moment in the UK’s recruitment industry but firms should consider taking a close look in the mirror before deciding on the best way to put their growth plans into action.

Research from the Recruitment and Employment Confederation shows the value of the UK’s recruitment industry has now returned to its pre-recession peak. Total revenue reached over £28bn in 2013/2014 – that’s more than £1bn higher than 2007/08 – while turnover growth reached 8.2 per cent per annum over the period.

The London Stock Exchange’s 1000 Companies to Inspire Britain report this year included 50 recruitment companies, double the number featured in the 2014 report.

Here at the Lloyds Recruitment Services team, which provides a range of funding solutions to support recruitment firms, our clients are making plans to grow their businesses both organically and via UK and international expansion. M&A activity has also been increasing recently, another positive indication of the confidence and growth in the sector.

Recruitment companies, particularly those in hot sectors such as construction, healthcare and education are seeing strong markets with sustainable and increasing margins, allowing them to maximise investment in their teams.

Confidence is definitely high in the industry. However speaking at Recruitment International’s recent “Managing Exceptional Growth” conference, I also stressed the need for recruitment companies to ask themselves some important questions, so that they get the very best out of any growth opportunities.

Careful assessment of business strategy and balance sheets can help recruitment businesses identify if, and where, to grow as well as any gaps that may need to be addressed along the way. Identifying key risks, reviewing market competition and forecasting are other crucial components which, when combined with this balance sheet focus, can help firms build a sound business plan to support their case for growth.

Whether it be for international expansion, new markets or mergers and acquisitions, planning for growth is funded through either equity, debt or a blend of both. Strict criteria, particularly around debt funding, also requires recruitment firms to look closely at the strength of specific areas of their business including management and financial monitoring, all the while asking themselves the crucial question of, ‘would I invest in this business if it were my own money?’

The strong growth at industry level will no doubt see competition become increasingly fierce amongst recruitment companies, causing some to rush into decisions that focus too much on short-term gains. By taking a step back and establishing the best route to growth for their own business, recruitment firms can keep pace with their peers while ensuring that this momentum can endure well into the future.