No contest for european move
Published: 11 June 2008
Eastern Europe's growing economic prosperity, its reputation as a low-cost region for manufacturing and back office operations make the region an attractive proposition for recruiters.
European recruitment trade body Eurociett says there has been 'double-digit' growth in recruitment agencies in Eastern Europe since the accession countries joined the EU in 2004, with 'hundreds' of new agencies opening.
Global executive search firms, such as Heidrick & Struggles, Korn/Ferry, Spencer Stuart, Russell Reynolds and Egon Zehnder, are already operating in the region.
Poul Pedersen, managing director of executive search firm Pedersen & Partners, runs 31 offices across Europe, including Sofia and Bucharest.
Pedersen says executive search competition would be fierce because new entrants would be latecomers to the marketplace.
He suggests that recruiters who want to expand into the region should instead target financial services, legal professional services executives, management consultants, accountants and real estate consultants where demand is higher.
He told Recruiter that although "setting up a legal structure and organising employment contracts is not difficult", recruiters need to be aware of cultural differences and focus on insurance, tax and deemed employment issues before opening an office.
China and India are "probably" more profitable potential revenue streams, says Pedersen.
Poland is Europe's fastest-growing economy after Slovakia and Lithuania, with GDP growth in the first quarter of 2008 at 6.1%, and Bulgaria and Romania not far behind, according to Poland's Central Statistical Office.
Germany's economy grew by 1.5%, the fastest quarterly rate in nearly 12 years, and the International Monetary Fund estimates that Russia's GDP will grow by around 7.8% this year, boosted by high oil prices.
By comparison, British GDP has grown by 0.4%, according to Office for National Statistics figures.
Claudiu Ciortea, country manager for Adecco Romania, told Recruiter that she had witnessed an increase in manufacturing, business process outsourcing and call centre vacancies.
Only last month, Nokia announced that it planned to relocate factories to Romania, and more than 40 companies have moved to the country since 2005, according to London's Evening Standard newspaper.
HVB, the German unit of Italian bank Unicredit Spa, also plans to relocate 250 clearing jobs to Poland, according to German newspaper Süddeutsche Zeitung.
A number of UK recruitment firms and their subsidiaries have already taken advantage of Eastern opportunities, including Antal International, Empresaria, Michael Page and Reed. Grafton Recruitment has been particularly busy putting flags in the ground far and wide in the East, including in the Czech Republic, Hungary, Lithuania, Romania and Russia.Armin Preisig, head of European operations at multi-sector recruitment group Empresaria, told Recruiter that Poland was a key growth area for temporary jobs, especially low-skilled, component assembly jobs which are increasingly being moved to the region. Poland is also experiencing a dearth of low-skilled workers, according to Preisig, and it is looking to its neighbours like Romania and Ukraine — and even overseas — to fill these roles.
Eurociett estimates that temporary agency work in Europe will increase, with 2.1m more jobs by 2012, bringing the total to 5.4m. This figure could rise by 500,000 if employment law restrictions are lifted.Martin O'Boyle, divisional director at IT and finance recruiter MRL, said Hong Kong and Singapore, in particular, represented a far greater return on investment than the emerging Eastern European nations.
However, he told Recruiter that such fertile economic conditions in Europe means recruitment will become an ever increasing market.
"I've seen it grow over the past seven years. Some car manufacturers and logistics firms have deliberately moved operations to the region, creating local jobs and openings.
"From a contract perspective, it's worth investing in the region. Whether the time is right, I don't know, but the time is coming."
As all eyes are on the global economy, where to invest is a key question for recruiters.
With a growing demand for temporary staff, Eastern Europe has real potential as a means for recruitment firms to grow their business, and with increasing numbers of companies outsourcing operations to Poland and Romania in particular, its reputation as a low-cost region for manufacturing and back office operations will only be enhanced.
Pedersen's top tips to set up an office in the region
- Set up a liability company offering limited financial liability to a fixed sum, most commonly the value of a person's investment in a company or partnership with limited liability
- Hire a local director/consultant who can speak the language
- Get an address, a director and a bank account, which you can do in one day
- In Russia, there may be more forms and stamps but you just need to approach a decent law firm
- Extend your current specialist field, rather than looking to venture out into new alien niche markets
- There are a number of countries with profoundly different cultures and legislation. While you could open up a financial services recruitment firm in Moscow, you would not be able to do the same in Budapest, as the market is too small
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