Positive outlook for recruitment companies: City Comment
29 May 2014
The Bank of England’s dilemma cannot be regarded as anything more than a welcome challenge, by any standards. Should it increase interest rates earlier or later? If the South East ‘housing boom’ is excluded, inflation is fairly benign and certainly not driving an over-heating of the economy.
Thu, 29 May 2014 | Sue Dodd, director Agile IntelligenceThe Bank of England’s dilemma cannot be regarded as anything more than a welcome challenge, by any standards. Should it increase interest rates earlier or later? If the South East ‘housing boom’ is excluded, inflation is fairly benign and certainly not driving an over-heating of the economy.
However, there is a reported 18% rise in London property prices, a 10% year-on-year rise in house loans in April and a widening gap between London and the rest of the UK. Yet Nationwide has just suggested that the London housing market will see a ‘natural correction’, with signs already of a slowdown. So perhaps drastic action is not needed, after all? It’s a complex picture, and whatever is right for London will probably not suit many parts of the UK, illustrating the need to tread carefully.
While alternative tools are also pursued to reign in house prices by the Bank, a recovering economy, strong GDP growth and improving employment outlook are encouraging the Bank to move towards its first rate rise for many years. 0.25% is likely to be the first increase, but perhaps not for another few months yet as it tries to balance underlying trends in the job market, export competitiveness, average earnings and the productivity gap with the phenomenon that is London’s housing market. As we said last month, sterling at five-year highs could possibly derail the recovery of exports – a key tenet for the Bank of England as government policy seeks to rebalance the economy towards more production and a stronger trade balance.
As share prices remain near their recent highs, my fellow City columnist Adrian Kearsey, head of smaller companies research at Sanlam Securities, last week talked of an improving climate for recruiters in the public equity market, discussing what is attractive to investors. He asserted that investors look for a clear articulated strategy and to understand which markets are being targeted and why. That argument leads neatly to the need for good-quality data on the recruitment sector, based on factual analysis, not poorly designed surveys, and an understanding of the markets and dynamics of their industry.
Our experience is that when companies seek such market intelligence, they reap the benefit quickly through their choice of market segment, knowing how their competitors operate and devising a counter strategy. To avoid doing this analysis is a false economy, as the consequences of an ill-based decision can affect a company for many years. With the recruitment market now into fairly indisputable overall recovery, now is the time to get it absolutely right.
Meanwhile, the latest labour market statistics continue to point to an expanding overall workforce, falling unemployment, rising temporary numbers and increasing job vacancies – all classic signs of a positive outlook for the recruitment industry. Even accepting that an element of the employment figures are coming under greater scrutiny, especially in regard of zero-hours contracts, the momentum in the job market is clearly building. As long as confidence continues to improve across the wider economy, the medium-term outlook for recruitment companies is as positive as has been seen for several years.
However, there is a reported 18% rise in London property prices, a 10% year-on-year rise in house loans in April and a widening gap between London and the rest of the UK. Yet Nationwide has just suggested that the London housing market will see a ‘natural correction’, with signs already of a slowdown. So perhaps drastic action is not needed, after all? It’s a complex picture, and whatever is right for London will probably not suit many parts of the UK, illustrating the need to tread carefully.
While alternative tools are also pursued to reign in house prices by the Bank, a recovering economy, strong GDP growth and improving employment outlook are encouraging the Bank to move towards its first rate rise for many years. 0.25% is likely to be the first increase, but perhaps not for another few months yet as it tries to balance underlying trends in the job market, export competitiveness, average earnings and the productivity gap with the phenomenon that is London’s housing market. As we said last month, sterling at five-year highs could possibly derail the recovery of exports – a key tenet for the Bank of England as government policy seeks to rebalance the economy towards more production and a stronger trade balance.
As share prices remain near their recent highs, my fellow City columnist Adrian Kearsey, head of smaller companies research at Sanlam Securities, last week talked of an improving climate for recruiters in the public equity market, discussing what is attractive to investors. He asserted that investors look for a clear articulated strategy and to understand which markets are being targeted and why. That argument leads neatly to the need for good-quality data on the recruitment sector, based on factual analysis, not poorly designed surveys, and an understanding of the markets and dynamics of their industry.
Our experience is that when companies seek such market intelligence, they reap the benefit quickly through their choice of market segment, knowing how their competitors operate and devising a counter strategy. To avoid doing this analysis is a false economy, as the consequences of an ill-based decision can affect a company for many years. With the recruitment market now into fairly indisputable overall recovery, now is the time to get it absolutely right.
Meanwhile, the latest labour market statistics continue to point to an expanding overall workforce, falling unemployment, rising temporary numbers and increasing job vacancies – all classic signs of a positive outlook for the recruitment industry. Even accepting that an element of the employment figures are coming under greater scrutiny, especially in regard of zero-hours contracts, the momentum in the job market is clearly building. As long as confidence continues to improve across the wider economy, the medium-term outlook for recruitment companies is as positive as has been seen for several years.
