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It is no secret that the UK staffing sector is currently contending with unprecedented skills shortages when it comes to sourcing and securing top talent for clients. However, following a bruising 18 months at the hands of the pandemic, it is now clear that this dearth of talent has extended into the staffing sector itself.

The latest edition of the APSCo UK Recruitment Index, which offers an annual insight into the UK staffing market, found that 43% of firms now have concerns over a shortage of consultants. The report, which is produced in conjunction with Saffery Champness, also confirms that a shortfall of applicants remains a key concern for recruitment businesses.

However, given the current situation, we shouldn’t be altogether surprised that the staffing sector itself is facing a brain drain of resources, with recruitment leaders indicating that attracting and retaining high-performing consultants is tough at the moment. The battle for talent within the recruitment industry is as strong as ever and is expected to increase during 2021-22. Like so many other sectors, the staffing market shed staff when times were tough, and a boom in hiring post-lockdown means that we no longer have sufficient talent to meet demand, with more reliance being placed on higher-performing consultants. This is obviously impacting organizational resilience. It is also no great revelation that our research found that consultants remain driven and ambitious, with recognition and the opportunity for real progression remaining strong motivators, on top of financial rewards.

Encouragingly, 66% of firms reported that remote working had a positive effect on their business, with 93% of consultancies not planning to change the remuneration of consultants who will now be working flexibly. These agile working practices without change to overall remuneration packages should improve the morale of the workforce and lead to higher retention rates in the future.

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Despite a concerning shortfall of experienced recruiters, it seems that the sector otherwise remains resilient. In our survey of staffing businesses, all firms indicated that they believed they had sufficient cash flows compared to last year, despite the ending of the furlough scheme and the upcoming need to pay deferred VAT and PAYE payments post-Covid.

However, while firms feel financially stable, concerns around skills availability – outside of their own businesses – are plaguing many consultancies. According to the study, the biggest challenge facing firms is a shortage of candidates, with almost half (47%) of those surveyed reporting this as a main concern.

The market is simply over-saturated with vacancies at the moment, which would normally be music to the ears of recruiters. But with skills shortages, the continued impact of Brexit and the long-lasting effect of IR35 still hanging over our heads, the recruitment market is struggling to meet demand.

We are seeing larger firms invest in technology to help battle through the sheer pressure from employers – a move that smaller staffing companies can certainly benefit from. The move into international markets is also continuing to pick up pace as more firms look to expand their remit in a post-Covid world.

In fact, our survey showed that 66% still had an appetite for overseas expansion, with 26% confirming that their desire to expand internationally had increased. Many of our members have seen growth by expanding overseas and it has helped during the pandemic to mitigate the effect of the downturn in the global economy. Through international expansion, our firms are starting to see real value being added, which could allow them to justify a higher sales price.

While we might not yet be out of the woods, there are signs of real positivity and growth opportunities for the staffing sector that have the potential to translate into significant financial returns. However, it is important that staffing companies prepare for the market “settling down.” The hiring spike we’re experiencing is being significantly influenced by the events of the last 20 months, but this will come to an end at some point. It’s likely that we won’t see the longer-term impact on the economy and inflation until the second half of 2022, and it’s crucial that recruiters plan for a hiring “slow-down” next year.

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