The wider recruitment industry, including managed services providers, agencies and their supply chain partners, is estimated to have directly contributed £42.9 billion to the UK economy in 2021.
4.1 Economic contribution
The wider recruitment industry, including managed services providers, agencies and their supply chain partners, is estimated to have directly contributed £42.9 billion to the UK economy in 2021. This is an increase of 21.7% on the previous year (2020), showing an impressive bounce back from the 11.5% decline we saw from 2019 to 2020. It accounts for 2.1% of the UK’s direct Gross Value Added (GVA), up from 1.8% in 2020.1
£36.4 billion (85%) was achieved through temporary/contract placement activity, up from the £32.7 billion highlighted in last year’s report.
£6.5 billion (15%) was achieved through permanent placement activity, up from £3.2 billion in 2020.
69% of income came solely from UK-based placements.
When benchmarking the recruitment industry’s GVA growth performance to other service sectors and the UK economy, the recruitment industry shows a strong performance. Over the same time period:
Administrative and support service activities (which ‘employment activities’ is part of) saw 11.2% growth overall.2
Professional scientific and technical activities saw 9.1% growth.
Advertising and market research saw 24.9% growth.
Overall, UK GDP increased by 7.2%.
While the UK economy performed strongly as we emerged from the pandemic, the recruitment industry’s recovery was particularly impressive. The industry played a vital role in sourcing and allocating labour as lockdown restrictions were lifted and we tried to return to a ‘normal’ way of work.
Figure 1
We can expect further strong growth in 2022’s full year results – despite growing concerns about the economy towards the latter end of 2022. The October 2022 survey of recruitment businesses indicates that the recovery will remain strong in 2022, with businesses expecting fees to grow 7.4%, and the volume of clients to grow 14.3% from 2021 to 2022.
Whilst we can’t currently see such high ‘recovery-driven’ growth levels persisting because of the economic outlook, historic trends suggest we can expect roughly 6% growth after 2022. If growth continues at this rate, the industry could contribute £51.3 billion to the UK economy in 2025.
4.2 Recruitment volumes and margins
At its core, the recruitment industry supports the UK economy by efficiently and effectively matching workers and employers, sustaining business growth and boosting productivity.
The industry made an estimated 547,692 permanent placements in 2021. This was 21.6% higher than the number reported in the 2020 report (450,400), showing the significant role the industry played as the economy emerged from the pandemic.
The industry made an estimated 22.4 million temporary/contract placements in 2021.
Both types of placements are vital in helping organisations access the labour they need. Temporary and contract placements allow businesses to fill skills gaps on a more flexible basis.
On average, the length of assignment for temporary workers is 15 weeks.
On average, the length of assignment for contract workers is 22 weeks.
We can expect placement numbers to continue to grow, alongside the forecasted increases in GVA from the industry. Our October 2022 survey of recruiters also suggests that we can expect greater margins on placements as we continue to recover from the pandemic.
Survey respondents indicated that over the past six months (April to September 2022), the average margin on permanent placements has increased by 6.2%.
For temporary/contract placements, this figure is 3.1%.
This provides more evidence of the continuing recovery of the sector beyond 2020. The sizeable margins might also reflect the extent of labour shortages in the UK economy, and therefore the high demand for recruitment services and recruitment expertise.
4.3 Enterprises and workforce
The number of recruitment enterprises has held up remarkably well despite the severity of the pandemic crisis. This reflects the resilience of recruiters and recruitment businesses in the face of immense challenges.
Figure 2
The combined number of enterprises operating across the UK recruitment industry was recorded at 30,620 at the start of 2021. This was slightly lower (-1.9%) than the previous figure of 31,220 at the start of 2020.
At the start of 2022, the number had fallen by a further 1.9% to 30,035. This was driven by a decline in temporary-centric employment agency activities, with the number of permanent-centric employment agencies increasing.
In terms of business size, most enterprises (79.5%) in the recruitment industry are micro-businesses with fewer than 10 employees. At the other end of the spectrum, there were around 470 enterprises (1.6%) with 250+ employees in 2022. This is very similar to the year before.
The modest decline in the number of agencies from 2021 to 2022 was primarily driven by a decrease in the number of micro-enterprises. This decline was likely attributed to smaller businesses finding it more difficult to survive in the face of economic challenges during the pandemic. However, enterprises in all other size bands increased over this period. In any case, the overall stability of the industry is highly commendable.
Figure 3
In 2022, most recruitment businesses (82%) had a turnover of less than £1 million, with a small minority of 180 firms (0.6%) experiencing a turnover of £50+ million. This is very similar to the previous year.
The drop in the total number of temporary employment agencies from 2021 to 2022 was driven by a reduction in the number of businesses with more than £100,000 in turnover. For both temporary and permanent staffing agencies, there were increases in the number of businesses with a turnover less than £50,000.
Figure 4
Figure 5
The regional distribution of permanent placement agencies stayed fairly stable compared to last year, but with a noteworthy decrease in the East Midlands – down by more than a fifth (23%) from 960 from March 2021 to 740 in March 2022.
Temporary employment agencies faced a similar story of general stability, with the East Midlands also seeing a significant drop – down by 43% from 1,125 to 640. This almost balances the previous year’s increase in the region of 48%, reflecting an adjustment back to pre-pandemic levels.
Figure 6
Roughly 201,154 staff were employed in recruitment activities in 2021. The survey suggests this is an increase of 6.5% on 2020, further evidencing a rebound from the pandemic-driven 2020. Based on survey results, this growth is expected to continue, with 6.9% growth estimated from 2021 to 2022.
We can now see the impressive way that the industry bounced back in 2021 and the early progress in 2022. Not only did recruitment businesses show remarkable resilience, but they have played a hugely important role to support the growth of UK’s economy. We can expect strong growth to continue.
