Member Article

Positive outlook for UK recruitment despite Brexit uncertainty

The UK recruitment industry remains attractive to investors, despite the economic uncertainty surrounding Brexit, according to the latest M&A Recruitment Report from accountancy and business advisory firm, BDO.

The UK recruitment industry ranked number one globally in 2018 for number of transactions (32), up by more than 50% from the previous year and overtaking the US for deal volume.

With a total revenue of £12.3bn, the industry continued to grow throughout the twelve months to December, although at a much slower rate than levels seen in the preceding five years.

Given the turmoil around Brexit, it’s positive to note that the UK saw sustained inward investment throughout 2018, with 25% of transactions involving an overseas buyer (an increase from 23% in 2017), illustrating continued growth in demand for UK recruitment assets.

Investment in the UK has remained attractive due to low unemployment levels and skill shortages in positions that need filling, while the weakening of the pound made UK assets attractive to global investors seeking undervalued opportunities.

Specialist providers in the construction and engineering sectors in particular saw notable uptake, demonstrating the continued importance of traditional industries to both the UK and global economy.

Private equity has continued to view the recruitment sector favourably - deal volumes have returned to less impressive 2016 levels, but appetite remains for assets from a ‘buy and build’ approach and those with a strong management team and clear growth plans.

The rise of alternative forms of lending has also been a notable recent trend; the use of unitranche debt has been particularly evident, for example.

James Fieldhouse, M&A Director at BDO LLP, said: “The continued growth of the recruitment industry and sustained investor interest is very positive and will no doubt give recruitment businesses confidence in their prospects for the year ahead, particularly given the pervading uncertainty caused by Brexit.”

He continued: “There are several key factors that we expect will further shape the recruitment industry during 2019 and beyond; the first, of course, being Brexit. The impact on business confidence has contributed to the delaying of recruitment plans and re-evaluation of hiring strategies - to put it into perspective, 96% of HR professionals and recruiters say that Brexit has impacted their hiring plans.

“Technology will also continue to play an important role in the coming years, the trend toward digitalisation showing no signs of slowing. Recruiters are increasingly using tech to save time and pursue more targeted leads - for example, 75% have used AI and ‘chatbots’ to drive efficiencies. It will be central to the development of the industry, with M&A interest in online portal and recruitment software expected to continue, mirroring the 11% increase in deals during 2018 - particularly domestically where software can be easily integrated.”

This was posted in Bdaily's Members' News section by BDO .