Midlands recruitment companies struggling despite increased job demand

RECRUITMENT companies in the Midlands are struggling despite the region’s buoyant employment markets, new research has suggested.

A study carried out by Hitachi Capital Invoice Finance has concluded just 15% of recruiters are seeing growth.

However, HCIF said that nearly half of respondents in the region had witnessed increased demand in the jobs market for temporary and contract work with the retail, manufacturing, construction and healthcare sectors most in demand.

The data shows that while the recruitment sector is growing, business owners in the Midlands are spending too much of their time on back office administration.

Half of firms highlighted that this was their most time-consuming task and almost one in five of respondents cited that 50% of their time was spent on approving timesheets, producing invoices and managing payroll.

Nationally, half of managing directors also said that investing in back office functions would play a key role in the future success of their businesses. Just 10% of firms agreed that a lack of infrastructure investment was the reason most recruitment firms failed.
 
John Atkinson, head of commercial business at Hitachi Capital Invoice Finance, said: “The potential growth of recruitment firms in the Midlands is being hampered by a lack of investment in back office functions. The sector is growing but in order to capitalise on this, companies need systems in place that support daily administration tasks and alleviate the burden so owners can focus on the day job of growing the business.”   
 
When questioned around the challenges they faced on starting up the business, 78% of owners agreed that establishing a client base was the biggest, with 38% citing overcoming cash flow problems.     
 
“It’s not uncommon for recruitment firms to struggle with cash flow, especially those placing temporary candidates because of the payment model that’s in place. This leaves firms too cash poor to cover day-to-day costs and is particularly detrimental for start-ups as they simply cannot get off the ground,” added Atkinson.

Nearly three quarters (68%) have seen competitor recruitment companies close over the past twelve months.  

“Too many firms fall at the first hurdle as they are unable to find a solution to safeguard their financial positioning and invest in the business to grow at a rate in line with the sector,” said Atkinson.