The UK’s recruitment industry has seen a significant decline in income as businesses slow down or freeze hiring in response to COVID-19.
A study in August by HSBC Professional Services suggests that as a result of changes in attitude to recruiting, as many as 80 per cent of recruitment firms expect their income to be lower in 2020-21, with the majority of businesses in the sector experiencing a 15-30 per cent drop in revenue this year.
As a result of this sudden downturn, around eighty-five per cent of recruiters have used the Government’s income tax and VAT deferment schemes, while 40 per cent have secured a Coronavirus loan of some form.
Unfortunately, for many businesses in this sector, a quick turnaround is looking less likely, as a study by Talent Nexus has revealed that 69 per cent of employers had fewer roles to recruit for in August compared to the period before the pandemic.
Thankfully, almost a third of respondents in the same study said they expected to be hiring gain as normal or scaling up in the coming months. With some indication that employers may start looking for new talent again later in the year, how can recruitment businesses hold out and adapt?
A business cannot effectively adapt and alter its approach without first establishing a starting point or continually monitoring its performance.
As a minimum, recruitment businesses should conduct regular cash flow forecasts that consider their cash position at 30, 60 and 90 days in the future.
This process should help them to understand when the business may need additional investment or allow them to consider cost management measures at the earliest opportunity before issues arise.
Those looking for an additional level of detail should consider investing in management accounting.
This process allows business leaders to use existing accounting information and business intelligence to analyse their performance on a weekly, monthly or quarterly basis – depending on the needs of the company.
By monitoring the key performance indicators identified within management accounts, businesses should be able to take swift decisions.
Thanks to the latest accounting technology, the process for creating management accounts and cashflow forecasts has never been easier and by having a clear overview of a business’s performance, owners and managers should be able to make better short and long-term decisions.
Pivoting has become ‘the’ business buzzword during the pandemic and there have been many businesses using this technique, to not only ensure their survival, but also grow and diversify their customer base.
Put simply, pivoting is the process of changing parts or the entirety of a business’s operations to access new sources of revenue.
A good example of this is the UK distilleries industry that when faced with a decline in sales to pubs and restaurants turned its attention to the production of hand sanitiser by utilising existing processes to produce an in-demand product.
Within the recruitment industry, things may not seem as easy at first sight. An overall decline in demand for the sector’s services may suggest that a pivot isn’t possible, however, certain sectors still have a demand for recruiters, such as the tech and scientific sectors, which have seen fantastic growth.
For general recruitment agencies, this may present an opportunity to specialise in areas with high demand, either by adapting their existing approach or by bringing in outside expertise to improve their access to these fields.
Recruiters could also assess whether they have other skills that can be passed to clients, such as the training of in-house recruiters or a shift to assisting businesses with the career development of their remaining staff members.
The important message here is that recruitment businesses should not wait for change to happen, but should instead seek innovation from within to explore new revenue streams.
There comes a point where businesses must also consider cost management options, such as reducing the number of staff in their team or reviewing the cost of leases and the sale of premises that they own.
However, before taking any drastic steps, which may reduce the effectiveness of their business, owners and managers should first consider what everyday costs they can reduce.
This could mean reviewing the price they pay for utilities, assessing software packages to see if there are lower-cost alternatives or eliminating certain staff benefits.
In many cases, businesses are often surprised by the potential savings available to them by making small changes. Whilst these savings may not ultimately rescue a company on their own, they can certainly help businesses to make fewer big changes that could reduce the company’s overall effectiveness.
Only after these straightforward costs have been reviewed should businesses look at more drastic steps, such as redundancies or the closure of offices.
Review your tax affairs
Thousands of businesses miss out on unclaimed tax relief every year and there are hundreds of available schemes in the UK, which could significantly reduce your tax bill.
For example, if a recruitment business has been involved in an innovation in the last two years, such as the development of new software or the creation of a new recruitment process that advances their industry, they could be eligible for an R&D tax credit, which could significantly reduce their Corporation Tax bill.
Businesses could also write off large expenses for the purchase of equipment or improvements to their premises via the various capital allowance schemes.
If you haven’t recently assessed your tax affairs then it is strongly advised that you seek professional help to check whether you are entitled to any form of tax relief.
Time to seek assistance
It can sometimes be difficult to admit you need help, but at times of crisis, such as these, failing to seek professional advice and support could be the difference between survival or closure.
We have spent years working with the recruitment industry, helping businesses to grow and thrive. However, we understand that the current pandemic is proving very challenging for this sector and so we are standing by to offer our help.