Recruiters are finally seeing an end to the declining revenue trend, according to BDO’s review of the latest outputs from Recruitment Industry Benchmarking (RIB).
While it is too early to celebrate a return to growth, a marginal increase in turnover for February 2010 in comparison to the same period last year is a much needed boost for the industry.

That said, February 2010’s turnover figure at only 3.7% higher than that of February 2009 means turnover remains significantly below historic levels. The industry has been in decline since the summer of 2008 and in the year to March 2009, the REC’s industry survey showed annual turnover reducing from a peak of £27bn to £22.5bn.

The further decline experienced since March 2009 would indicate that for the year to March 2010, industry turnover could fall even lower to between £18bn and £19bn.

While turnover has consistently fallen, recruiters have been significantly reducing their costs to enable them to manage their businesses profitably and within the financing available.

Since June 2009, the profitability has been positive at least making up for some of the losses incurred in the previous six months. This year has started more positively with both January and February returning a net profit on turnover of around 2%.

The challenge for recruiters for the rest of the year will be to ensure that as there is potential to start increasing turnover, this is both earnings-enhancing and cash-positive. As headroom in financing facilities will have diminished during the last 18 months to fund losses, uncertainty in the sector may remain for some time.
A lot of recruiters will not have sufficient funds to grow the business back to a level seen during 2007 and 2008 and may therefore require external finance. Unfortunately, raising finance in the current climate is difficult, especially if you are seeking to do so with a track record of being loss-making.

The Chancellor promised £94bn of small business loans in his March Budget, but despite this help the political uncertainty as we await a general election will mean that implementing these proposals is more difficult to achieve.

Recruiters, therefore, need to ensure that they fully understand their income and expenditure over the next 12 months and that they have sufficient resources available to meet their needs.

The following will help to guarantee that your request is given due consideration - but not that it necessarily will be funded: having a clear plan that can be articulated to a funder of how much funding is needed; what it is going to be used for; and allowing the funder sufficient time to consider the proposal.
Asking a financier to review a proposal in a short timescale because you are about to run out of cash will leave you in a poor negotiating position, potentially losing the business you have worked so hard to preserve during the past difficult months.

Asking a financier to review a proposal in a short timescale because you are about to run out of cash will leave you in a poor negotiating position, potentially losing the business you have worked so hard to preserve during the past difficult months.

The positive signs for 2010 are welcome but do not diminish the need for careful planning and control. The hard work is set to continue or maybe even just about to start.

Key indicators:

• Below historic levels Despite a 3.7% increase in turnover in February 2010 on February 2009, this turnover figure is still significantly below historic levels. The Recruitment and Employment Confederation’s recent industry survey revealed annual turnover reducing from a peak of £27bn in March 2008 to £22.5bn in March 2009
• Profitability positive Since June 2009, profitability has been positive, with January and February 2010 returning a net profit on turnover of around 2%
• Careful planning vital Although positive signs are encouraging, the need for careful planning and control is more necessary than ever