Revenues may still be significantly below peak levels of 2007 and 2008, but the past few months’ results have shown some stability, according to BDO Stoy Hayward’s review of the latest data outputs from Recruitment Industry Benchmarking (RIB).

This may not give much comfort to the various stakeholders within the sector as this reduction can, and has, severely impaired a number of businesses’ ability to continue to trade.

The last four months’ permanent revenues have remained at 55-60% of previous years - still a significant fall, but this implies that placements may have reached a level of stability. The fall in temporary revenues has not been as acute and this too has started to show some signs of stabilising as reductions year-on-year are below 20%.

Christopher Clark, corporate finance partner at BDO Stoy Hayward, said: “It is still too early for celebration but recruiters have found it difficult to plan and budget when no-one can predict how much the recruitment sector will contract during this recession. If the data over the next couple of months is consistent with the above, recruiters will be able to plan around an expected revenue level, commit resources appropriately and start to drive revenue growth once more.”

Analysis of the margin earned on temporary and permanent placements makes interesting reading. Temporary margins have increased each month during the year. This is surprising in a market where competition to supply is fierce and you would expect under-cutting of margin to win business. Increases in this area are probably due to a number of factors:

• Critical posts with shortages of quality candidates will always attract premium margins. Key areas are still recruiting where they can find talent but they have to pay an appropriate market rate.
• At the lower skilled/volume end of the market where margins have typically been lower, placements are less likely to be continued. As these placements end, and are not renewed, the effect they have on the overall average reduces, resulting in an overall rise margin.

The margin earned on permanent placements (measured by the invoice value as percentage of the placement salary) has been volatile. The variance of 3.5% over the two-year period can have a significant effect on the amounts due on a placement. This may be due to the mix of placements by salary band as scale charges vary by salary band and will determine the commission payable.

What is worth noting is that the average placement salary has been deteriorating in the past year. The chart (above) highlights that would currently be expected; placement salaries of between £25,000 to £26,000 that would have been as high as £27,500 during 2007. This shows that where companies are committing to taking on permanent employees they are able to negotiate lower salary levels of somewhere between 5.5-9%.

Clark added: “Employers should not be criticised for taking advantage of the current market opportunity to review salary levels. In the context that salary levels have historically been driven higher by the competition for talent, it was inevitable that there would be a market correction at some point.”

Crawfurd Walker, director at RIB, concluded: “It is still too early for celebrations but a level of stability also appears to have been reached on a number of the other measurements we provide to our members. Certain measurements are even showing signs of improvement, highlighting how professional recruiters have adjusted their operation to the requirements of the current market and how forward-thinking management are already planning to maximise their performance in the upturn.”

Recruitment Industry Benchmarking (RIB) provides its members with bespoke monthly comparisons of their performance on key industry measurements.