According to new research carried out by market analysts Plimsoll, one in three recruiters are currently making a loss. This is due to ever increasing costs pertaining to things such as fuel, materials and ever increasing wage demands.
David Pattison, senior analyst at Plimsoll has stated that ‘62% of companies have seen their gross margin fall in the latest year. Unfortunately, many are reluctant to pass on price rises for fear of losing customers to cost-savvy competitors. However, falling profit margins across the industry is the first warning sign that this strategy has become unsustainable.
Over the past 2 years the average profit margin in UK recruitment has dropped by 2%. In light of this Recruitment companies are faced with the tough decision of protecting their market share and inevitably continue to loss money or adjust their prices to reflect their increased costs. At this stage, bearing in mind that recruitment is currently a very opportunistic environment, any solutions presented will seem very lose/lose to any company considering their best option of recovery.
It could be argued that it will fall to government to fashion a solution but with them still entangled in cuts on everything this prospect seems unlikely. However, some companies are forecasting recovery but volumes remain well down when matched against historical figures. It has also been argued that the implementation of the AWR will have an increasingly negative effect on the company.