This UK recruitment downturn looks set to last

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Who will recruit the recruiters? The industry is in a slump. Robert Walters, which plugs people into white-collar jobs, on Tuesday reported a 14 per cent year-on-year drop in net fee income for the third quarter, with the UK its toughest market.

Numbers from UK-listed peers this month told a similar tale: Hays down 15 per cent and PageGroup 16.7 per cent. Forecasts have been declining all year. Share prices have been heading broadly south since the post-Covid-19 hiring bulge.

Tellingly for an industry that thrives on bullishness, green shoots are sparse. Don’t be thrown by the UK’s latest job numbers, showing payroll employment was flat in September. It is churn on which recruitment agencies thrive. Job vacancies in both the UK and US are falling, in the latter by 1.3mn in August, the latest data shows.

The missing ingredient is confidence. Employers are wary of expansive hiring; candidates are reluctant to switch jobs. As a result, more man hours are translating into less business. At PageGroup, the proportion of candidates baulking before they sign on the dotted line has doubled to 40 per cent. Other companies point to interviewing about eight candidates per role, up from the more usual six.

There are bright spots for artificial intelligence engineers or legal specialists, still in demand and securing big paychecks. But for most, there is little incentive to switch jobs for a pay rise of perhaps 5-7 per cent at a time when global uncertainties from wars to elections suggest the “last in, first out” adage might apply.

Recruiters downplay disintermediation, noting the growth in net fees over the past peak-to-peak cycle. But hiring notices posted on LinkedIn and social media — even heavy industry king Deere & Co has turned to TikTok to fill influencer posts — suggest at least some insourcing. More companies are handing out finders’ fees to employees who introduce new hires. At the mass end, job boards like Indeed take business.

Recruiters are cutting costs while waiting for an uptick. That is not going to happen before the new year at the earliest, even with some stimuli on the horizon.

Interest rate cuts should help hiring, albeit previous cycles suggest a six-month lag. Uncertainties will fall away with the UK Budget this month and the US election next. Generative AI, which may yet eat their lunch, has a positive side: a deluge of AI-generated cookie cutter applications might persuade weary employers to beat a path back to the specialists. Still, this remains a sector to bypass until employees become more fleet-footed.

[email protected]