Recruiters adapt to structural challenges facing UK jobs market
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
It is becoming an anxious time for UK recruiters. There are signs that activity in the labour market is starting to cool. Employers are struggling to offer inflation-beating pay rises. And many jobseekers are reluctant to commit.
“There is not a huge flow of candidates,” says Doug Rode, managing director for the UK and Ireland at PageGroup, one of the UK’s biggest recruitment companies. “Vacancies have been harder to fill.”
He points to trends highlighted by recent research from consultancy Gartner, which found that more than a third of job hunters had received four or more offers during their last job search. Even when candidates had accepted an offer from a new employer, almost half admitted they were still open to rival proposals.
“We’re seeing a similar trend at Page,” says Rode. “Candidates have high expectations for what they want from their next role and may be juggling multiple offers at once, trying to decide which one is right for them. In some cases, a candidate will secure more than one offer and still find themselves reluctant to commit to one straightaway.”
He adds that “buyback offers” — where employers make a counterbid to prevent staff leaving — are adding to the pressure. Companies are more likely to do this when wage growth tails off.
For the past two years, recruiters have benefited from an active market, in part driven by the “great resignation” — an exodus of workers during the pandemic. It helped the market value of UK recruitment firms to hit £141bn in 2022, according to Mintel — up £20bn on 2019.
But, this year, recruiters have suffered from a fall in the volume of permanent job vacancies that has dented income and profits. At the same time, they are having to work harder to meet the demands of candidates and secure placements.
“People are looking at the whole package [offered by employers],” adds Rode. “Money is really important but, from a candidate’s point of view, there is a lot on their wish list [before they] accept a job.”
He cites considerations such as career progression, mental health support, work-life balance, and remote-working opportunities. If companies do not have good enough policies in these areas, “people will be tempted to keep looking”.
The Financial Times and research group Statista have ranked UK recruiters in several categories, including executive search, specialist search, and temporary staffing, and in 10 sectors, from biotech and pharmaceuticals to oil and gas. Statista asked recruitment consultants, companies’ own hiring managers and candidates to recommend recruiters for each category.
Yvonne Thamm, the Statista analyst who led the research, notes that only four of the 154 UK recruitment agencies listed — Hays, Korn Ferry (UK), Michael Page and Odgers Berndtson, all larger companies — were recommended in 10 or more categories.
Business and professional services had the largest number of recommendations. More niche markets, such as oil and gas, had the lowest number of ranked agencies. “This somewhat mirrors the service-oriented job market in the UK,” explains Thamm.
The survey highlights the multiple challenges recruiters face as they navigate stubbornly high inflation rates, dramatic shifts in work patterns following the pandemic, and the acute skills shortages that have arisen in Britain as a result of Brexit.
“The UK has more structural challenges than other places,” says Rode.
It is the task of recruiters to help employers position themselves astutely around these issues.
Thamm notes that the majority of recruiters considered “meeting inflationary pay expectations” as the main challenge in recruitment over the next two years, followed by offering flexible hours. Human resource managers singled out flexible working and diversity, equity and inclusion as the principal trends.
“Organisations are continuing to increase pay for staff as the cost of living keeps on rising, yet salary dissatisfaction remains high,” says Simon Winfield, chief executive of Hays UK and Ireland.
“While pay is a crucial consideration for staff moving jobs, professionals are also prioritising job fulfilment and working for an organisation with a strong sense of purpose.”
Tierney Remick, vice-chair of the global board and CEO practice at US-headquartered Korn Ferry (the only recruiter to be rated in all industries in the Statista ranking), agrees that employers are having to formulate a broader package of benefits to attract applicants. “Beyond a pay cheque, firms must offer development and advancement opportunities, and foster interactions across multiple levels of the organisation,” she says.
As most professional services companies settle into working patterns that involve at least some remote working, the degree of flexibility is a big factor in the battle for staff. More candidates want to know upfront what will be expected in terms of in-office and homeworking, and will use that information to decide which offer to accept.
“Employers are facing a balancing act between encouraging staff back to the workplace and attracting and retaining talent in this new age of working, where flexibility is in demand,” says Winfield.
“Organisations are also spending more time curating the ‘employee experience’ — the interactions an employee has with people, systems, policies, and the physical and virtual workspace.”
Despite the cooling jobs market, some pockets of UK recruitment remain extremely buoyant. “Tech is a very interesting space,” says PageGroup’s Rode. “The high-profile redundancies earlier in the year have been absorbed into the market relatively quickly.”
Remick notes that “a few areas that are ‘hot’ are artificial intelligence-related jobs, such as engineering and analytics, and finance, given the uncertainty of the market. Generally speaking, people who can lead through ambiguity, transformation and innovation are in high demand.”
Winfield says that, while “hiring intentions” have slowed during 2023, competition for staff remains strong, and skills shortages persist across industries such as engineering, construction and finance. “Growing industries such as sustainability are also already experiencing difficulty in finding the right talent,” he adds.
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