Times are hard. The world is teetering on the brink of a recession, as the misfiring US economy continues to threatens global trade. While Europe is still performing well, confidence is down after months of profit warnings and poor sales figures.

Although Gordon Brown has pledged to prevent a return to the bad old days of boom and bust, the wise recruiter will have contingency plans in the event of a serious slump. Some companies believe they have a formula that allows them to benefit from a downturn - so what can recruiters do to soften the blow?

Exercising caution

Like everybody in the business community, recruiters are unsure about the economic outlook. Tony Goodwin, chairman and CEO of Antal International, echoes the sentiments of many in the industry: ‘The economy is like a jumbo jet - when one of its engines breaks down it can still carry on,’ he says. ‘One of those engines - IT and telecommunications - has broken down. But other areas still remain profitable, such as FMCG.’

Other recruiters agree with Goodwin’s analysis that while certain areas of the economy perform well, others are in crisis.

A recession is defined in economic terms as two consecutive quarters of negative economic growth - a situation very different from the one currently facing recruiters. But people are beginning to worry. No one really knows if the caution demonstrated by many companies this year is a precursor to a slump or a recovery.

John Constable, director of recruitment to recruitment firm Recruitment Figures, says: ‘I am not sure whether we are going to have a recession or if we are just experiencing a slowdown - but there is no doubt that there is some real pain out there.’

Others remain optimistic about the future and report that certain sectors show signs of improvement. Simon Gee, MD of Heywood Associates, believes that the contract and temporary markets have improved. ‘What happens is that there are a lot of jobs that have to be done regardless of the economy, and companies hire temporary and contract workers to disguise costs,’ he explains.

But recruiters must be cautious - if the economy does take a turn for the worse, they will be the first to feel the pinch as clients stop hiring staff. ‘During the last recession in the early nineties, a third of the recruitment industry disappeared,’ warns Constable.

Surprisingly, many recruiters believe that a recession would be a good thing for the industry. The idea is that a downturn disposes of the cowboys that give the industry a bad name and compete dishonestly with ethical firms.

Kirsty Young is director of Manchester-based search and selection firm Armstrong Craven. ‘A recession can be a good thing, because badly run recruitment firms go out of business,’ she says.

It might be that the third of the industry that disappeared during the last slump were cowboys - but even ethical recruiters could face bankruptcy unless they tighten their belts.

So what can recruiters do to ensure they are not part of the 33% that fail during an economic decline?

Balancing the books

After the excesses of 2000, it is essential that recruiters take control of their businesses and balance their books. The first problem the industry faces is dealing with a decline in sales.

In a time when sales may be slow or non-existent, the first step should be to cut back on costs. Barry McKeown, director of the automotive and industrial recruiter Henry Court, favours a hands-on approach to cost-cutting. ‘One of the exercises I decided to do is review every purchase I made for a month, looking at everything we bought,’ he explains.

‘If we could have bought it cheaper from somewhere else, I told the staff so they learned how to save costs next time.’

McKeown goes as far as having ‘no purchase months’ when sales are down, to keep costs to a minimum.

Keep on selling

But keeping costs low is only one side of the equation - how can recruiters improve sales when times are tough?

Heywood Associates’ Simon Gee believes it is hard to place candidates during a downturn, because it is more difficult to find positions for people who are not currently in a job. 'Those people are always harder to place - they are often the people who were pushed out or about to be pushed out,' he says.

Gee thinks recruiters would benefit from focusing on temporary contract markets in essential business services like accounting. In a slump, large companies use these staff in the short term because they are unwilling to commit the costs of hiring long-term staff.

Focusing on these markets is a good way to keep a recruitment business ticking over - although many businesspeople believe this short-termism to be a dubious strategy, recruiters nevertheless stand to benefit from it.

A common strategy is to have a diverse range of products on offer. Kirsty Young explains how Armstrong Craven supports its search and selection arm with a business to business information service, which provides clients with statistics and business advice.

She says: 'It is crucial to improve the variety of services you offer to your clients to build relationships with them.'

McKeown goes even further down this route and uses the 'just-in-time' recruitment practices he learnt in the automotive industry to cater for clients' needs. 'A client in Bradford wanted to change locations, so not only did we help them move the production facility, but we actually built the building for them. We found them the foremen and staff needed to build it,' he reports. Because McKeown has trained his staff to be multi-skilled, he believes that he will be able to apply the same approach across his company.

Henry Court also supplies staff to the construction and supply chain industries, and is able to move recruiters from sectors that are performing badly to those that perform well.

The company has standardised its systems so that staff can easily transfer from one department to another, and staff are trained to be able to work in other areas of the business. A recruiter from the supply chain side of the business will be able to adapt to work in construction without significant training costs, for example.

This method of man management may ensure that no staff will need to be made redundant in the event of a recession. McKeown says: 'If the bottom fell out of construction I would move staff from that sector into another sector that is performing well - all our staff are capable of moving to other areas.'

Client focus

Although recruiters will be the first to feel the chill wind of a recession, they are also the first to reap the rewards of a recovery. This is why recruiters that cut back on their workforce will suffer in the long term when the economy begins to improve.

David Hughes, chief executive of accountancy and financial recruiter Executive Connections, says the organisations that did not lay off staff during the recession were in the best position to capitalise when bust turned to boom.

'During the last recession I remember one agency kept hold of its staff when other people were laying them off. They were the ones that were best able to satisfy demand when the market conditions improved,' Hughes explains.

Recruiters should have two goals when dealing with a recession - ensuring the business survives, then making it flourish when the economy begins to expand again. Although it is important to minimise wastage and lose staff that may not be performing well, the people that make the business run smoothly must be there to pick up the pieces.

Some recruiters are critical of the knee-jerk approaches that larger organisations are taking. Indeed, one of McKeown’s recession-busting rules is never to lose good staff: 'If they are good, we will stick with them through thick and thin,' he says.

Recruiters should not forget the maxim that the needs of key clients must come first when the economy moves up a gear.

Marcia Roberts, director of external communications at the REC, says most members are being proactive in building relationships with clients. She agrees that the well-documented IT and technology decline is beginning to affect recruiters, but reports that public sector demand is steady.

Roberts believes that many companies will attempt to survive a recession by merging with other firms. But she warns that red tape from the British and European governments could make life even harder for recruiters: 'I am concerned about the regulatory impact - the new rules coupled with a recession will be a double whammy for the industry.'

So recruiters could be faced with challenging times ahead - the European factor coupled with a slump will mean they will have to be even more on top of their game.

Recruiters agree that only the most dedicated professionals, who are focused on their customers and retaining the staff needed to serve them, would survive a downturn as serious as that experienced at the beginning of the 90s.

The agencies that are organised enough to tough it out through hard times will be the best placed in the long term. As Simon Gee says: 'Agencies must make sure they are the first call clients make when they decide to hire again - when they start making job orders, never turn them down.'