Record numbers of recruitment start-ups, but what does it really mean?

New recruitment companies formed at record breaking levels

In February we looked at the topic of recruitment sector data driven headlines and considered how they could appear contradictory and complementary at the same time. Often, an individual statistic is taken in isolation and is paraded as a bellwether that supports a concrete fact. However, we should be wary of reading too much into it because, often, an individual data point is meaningless without context.
Another recruitment data point that is of great interest to the industry is that relating to start-up activity. An FOI request to Companies House revealed that 9001 recruitment firms newly registered between January and mid-December 2017, an average of 818 per month, bringing the total number of recruitment firms to 35,275, a record. Compare this with 2016 where an average of 540 start-ups per month swelled numbers by 6,485.
Some analysis reads this data as indicating:

• More agencies are being formed to help employers fill resource gaps

• Demand for temp and contractor hiring services by employers remains high

• Entrepreneurial recruiters are opting to secure their futures after enduring employment uncertainty over recent years

These seem possible, even reasonable. But is it a series of assertions that are connected to construct a narrative that everything is coming up roses?

What else is going on out there?

If we consider some of the other recent headline grabbing recruitment sector data that’s out there and from which predictive analysis has flowed:

• From DWP figures, the back-end of 2017 saw record numbers of people in work

• From ONS figures, there is a skills shortage as evidenced by record numbers of vacancies

• From ONS figures, the number of EU workers coming to the UK has fallen for the second consecutive quarter

These figures are also used to construct some common narratives. One of them is that the UK economy is going to tank as it is starved of talent. Another is that Brexit should be overturned because it is going to damage the nation’s wealth.
These are bold, even brave assertions. But are they stretching too far, and should we be wary of sweeping statements based on a relatively narrow view, especially where they are used to shape opinion around major economic, political and legislative issues?

So, what does the growth in recruitment company numbers really mean?

Perhaps if we bear this in mind, we can gain a little more insight from the growth of the numbers of companies in the recruitment sector.
Over 2016-17 we can say that growth is certainly double digit – in fact a whopping 28% year-on-year – and this suggests the recruitment trade is buoyant. That seems a pretty reasonable conclusion, and there are a number of others:

• Some are likely to be one-man bands with recruiters operating a start-up solo and bootstrapping to offer a minimum viable service without taking on debt

• Some may be working as consultants within corporate HR

• Some may be bigger concerns with seed funding supported by angel investors or PE/VC

• Increased numbers of agencies is likely to increase competitive pressure

• The most successful are likely to be those that leverage technology

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See how The Telegraph reveals some of the deeper data around resource and skills shortages in health and social work and the hotel and food industries in the article ‘Struggle to fill vacancies amid UK jobs boom’.