Four in five recruitment firms said they expect a drop in full-year income in 2020-2021 as a result of the Covid pandemic.
The majority of recruitment firms forecast a 15-30 per cent drop in income compared to the previous year, the survey by HSBC’s professional services team found.
HSBC UK’s head of professional services Chloe Clift said: “Recruitment does tend to be a great barometer of what’s happening in the wider economy. It is not surprising they were hit hard very quickly.”
However, one finance chief responding to the survey said they suffered a “larger erosion of revenues due to IR35” changes planned for last April than they did from the coronavirus pandemic.
Recruitment firms have been quick to cut costs during the crisis and have also made use of financial support from the government.
Four-fifths of firms said their initial action to save money on staff and remuneration was sufficient, prompt and at the right level.
Eighty-five per cent of firms are using the government’s income tax and VAT deferment schemes and 40 per cent have used one of the government’s coronavirus loan schemes.
Job cuts are likely in the sector with nearly half of firms expecting to make furloughed staff redundant.
“November and March and the furlough scheme coming to an end will be pinch points not just for recruitment but for the entire economy and it will be interesting to see how resilient those companies remain when they have to start bringing back workers and fronting that full cost themselves,” Clift said.
However, despite the grim outlook there remains optimism that the sector can bounce back quickly as the economy improves.
Associate director of professional services at HSBC UK Tim Montagu said: “A lot of clients see greenshoots.
“They are flexible businesses in terms of costs and work so much on commission structures that is how they can manage it.”
Clift said: “Some clients we have been speaking to have gone through a huge amount of change and used it as an opportunity to review underperforming people within their organisation.
“They are now looking forward and saying who do we need to hire? How can we ramp up to meet demand? It looks like clients are starting to look forward and look at growth opportunities.”