The year 2020 has ushered in unprecedented challenges for the recruitment industry. With many employees having been placed on furlough, unemployment at a 5-year high and the UK in the midst of recession for the first time in 11 years, it is unsurprising that recruitment agencies are struggling to maintain the same level of leads and conversions as that experienced before the coronavirus.
The recruitment sector has benefited, however, from an existing technological and operational structure that has facilitated a relatively painless transition to home working. As a result, recruitment businesses have been instrumental in the fight against the virus, having armed the healthcare, pharmaceuticals and life sciences sectors with vital skilled labour. Nevertheless, even recruiters specialising in these areas will have experienced the operational challenges of contracting customer budgets.
The recruitment industry will have an important role to play in re-mobilising the UK workforce, when we once again emerge from lockdown, and this is likely to entail major structural changes to the economy. However, it will be important for those involved in recruitment to maintain the same level of diligence and adaptability typified by their entry into the crisis earlier this year.
It has become clear that the economic effects of lockdown for businesses will last much longer than the duration of any restrictions, and it is therefore crucial that firms remain vigilant to the risks of managing their cash flow, whilst grappling with the challenges of a drop in turnover and/or margins, shorter term contracts and an increased credit risk from a greater incidence of bad debt.
A recent global survey by one of our associates in the sector identified the following trends in response to the future of work and hiring in response to COVID-19:
- 77% of business hiring plans were impacted by the pandemic, with only 13% saying there had been no impact
- 51% of entities have had to rely on a government coronavirus scheme
However, it is not all negative:
- 75% of businesses intend to introduce more flexible working hours and working from home policies, potentially on a voluntary basis
- 64% of businesses have not asked staff to reduce their hours or use up holiday entitlement
- 66% of entities performing creative functions predict a rise in demand in coming months
With furlough being extended to March 2021, this may well be the ideal time for recruitment businesses to take stock by reviewing the suitability of their pre-coronavirus liabilities and overheads.
So, what steps can your recruitment business take to safeguard its cash flow in the coming months?
- As mentioned above, the recruitment sector has made an extremely successful adjustment to home working and many employed within the sector have reported a markedly positive impact on productivity and mental health. Accordingly, you may find that a reasonably non-intrusive way to significantly reduce your overheads is to downsize or rent out your office space.
- Another tried and tested strategy that many recruiters will have been employing already is a more clinical approach to financial accounting practices and recovery of any overdue invoices.
- Sometimes, however, more extensive intervention may be required. A more comprehensive solution may involve a financial restructuring process which would allow you to adjust your long-term outgoings, downsize non-core departments, redirect funding to more profitable areas of your business and review your funding requirements and the cost of working capital.
- While no business is ever keen on the prospect of entering any form of insolvency process, navigating formal insolvency doesn’t have to mean the end of your business, and the earlier you seek advice, the more options you will have, not only for your company, but to protect your own position as a director and business owner.
If you would like to discuss options for your recruitment business, our specialists provide tailored and informed advice with tact and discretion and are always willing to speak to you on a confidential basis. Often, just being able to talk to an expert in this area is all that is needed to put your mind at rest.
Francis Wilks & Jones, BM Advisory and BM Structured Finance work together to provide recruitment agencies with tailored, expert advice on everything from company voluntary arrangements to business rescue solutions, restructurings, administrations and raising finance. Learn more about how, together, we can help you achieve the best possible outcome for your business.