Future of Recruitment 2020-2030 – Your Future Starts Today

Future of Recruitment 2020-2030 – Your Future Starts Today

Over the past six to seven years I have written many blogs, many of which have proved hugely popular like Top 5 Recruitment Sectors to be in for the next 5-10 years which has had over 30,000 readers and this years Top Recruitment Sectors for Growth in 2018 .
This blog however is probably my most important as for those of you working in the Recruitment Sector either acting as agencies, internal recruiters or HR professionals the next 15-20 year promise to be the most dynamic, volatile and revolutionary in the history of our sector.

The level of change that our industry and the “world of work” will go through is to some people incomprehensible.

As business growth coaches we are challenged when supporting our clients with their three to five year growth plans in having to predict the impact of many of these changes upon their market sectors a task we have been doing now for nearly 10 years.

If you are looking to develop your career in recruitment or sell your business in three to five years, what the world will look like and how resilient your market sector will be in five to ten years is a major consideration.

This question therefore is one we consider and reflect on weekly with our clients as more information and reports are circulated.

Our blog therefore represents our snapshot in time (Spring 2018) and could be different in six months time as revelations about the Future of the World of Work unfolds.

Recruitment Industry Agency Models

 

To us there are essentially three agency models, which can be blended or broken down and modified to reflect certain sectors.

• Niche recruiters
• Generalist Recruiters
• Managed Services (MSP/RPO/NV/Mast Vend)

Increasingly the market is polarising around the Niche and Managed Service models with the generalists struggling to maintain margins, market differentiation and profitability.

Niche Recruiters

The Niche model, in its various guises, leverages the numerous skills-gaps that exist in the UK and Global economies and has two drivers,

• Find the rare skilled candidates and gain a degree of exclusivity
• Sell the rare skilled candidates to the highest bidder

Niche recruiters have been the success story of the past 15-20 years and are dominated by SMEs. They leverage their status as niche sector experts and master their ability to find and secure any skill in that sector. It is fair to say most of our high growth agencies are all niche agencies.

Increasingly these niches are becoming narrower and deeper. The expression “inch wide, mile deep” has been used many times to describe them.

These agencies have become very effective at maximising their fees and making healthy returns.

Managed Service Recruiters

These operate at the opposite end of the market and work on volume and at a lower transaction price. They industrialise process and are constantly seeking productivity gains to driver down delivery costs, as well as increase their quality service thus generating extra profit.

The cost of acquisition of staff for their clients is constantly failing as they invest greater and greater sums in automation. AI and chat-bots greatly excite this sector as it gives them even further opportunities to increase productivity gains. It also raises the bar for the smaller operators as entry to this market becomes more complex and costly. That said this too might shift with automation. We will have to see.

These suppliers have become very effective at exploiting their clients employer brands as they become very effective “one-stop-shops”.

At the same time the agencies in this sector are seeing their market under attack from Clients In-sourcing strategies where In-House Teams take these contracts back inside and TUPE over the operational staff that are delivering these solutions.

Generalist Recruiters

Increasingly the directors of these businesses are moving their companies more towards operating as a collection of niche businesses under one-roof as they see their margins squeezed by the ever-aggressive Managed Services Businesses and as they struggle to provide expertise that the niche agency suppliers bring to bear.

In certain localities across the UK we see a future for these generalists if they focus on getting close to the SME business sector in their locality but in most locations I think they will struggle unless they specialise and move towards the niche model.

Key Reports

This is a dynamic landscape with new reports out each week but the key reports we focused in this blog are:

PWC – UK Economic Outlook 2017 -Workforce of the future
Forrester – The Top Emerging Technologies To Watch: 2017 To 2021, various
World Economic Forum – Future of Jobs
Frey & Osborne – Future of Employment & US & UK Labour Stats
Nesta/Pearson – The Future of Skills: Trends impacting on UK employment in 2030
Deloitte – (2016) Automation transforming UK industries
REC – The future of jobs Report
• Elon Musk – Various Interviews

Key Headlines

The world of work and the future of recruitment is going to be a highly dynamic market and there is no overwhelming consensus on the cumulative effects of change as to what the future will look like.

There is general agreement however on some elements like what are the major technological dynamics that will affect the market:

• Automation
• Augmentation
• Artificial Intelligence
• Autonomous Vehicles
• 3D Printing

It should also be noted that there are other effects, which also feed into this market dynamic and these are:

• Longevity and ageing societies
• Changing Nature of Work, flexible working, remote working
• Climate change and natural resources
• Geopolitical volatility
• Consumer ethics and privacy issues

Automation

Automation affects employment in 2 ways:

Displacement Effect

• Negatively – by directly displacing workers from tasks they were previously performing.
• Tend to be low skilled roles

Productivity Effect

• Positively – by increasing the demand for labour in other industries or jobs that arise due to automation
• Tend to be high skilled roles

An analysis by Deloitte of ONS data suggests that the impact of automation is already being felt in sectors where a high proportion of jobs have a high chance of being automated. (Taken from REC – Future of Jobs).

In the UK most of the major jobs losses between 2001-15 have been in Manufacturing 720,000 with the largest number being created in Health and Social Care 1.1m.

Interestingly Professional, Scientific and Technical appeared in the top three for both jobs lost and created. Deloitte’s analysis concluded that all of those lost had a high chance of automation whilst of those created 88% had a low chance of automation.

Augmentation

This is where technology is not replacing workers but supporting or augmenting their skills and performance to improve their effectiveness and efficiency.

A good example of how automation is augmenting healthcare jobs can be seen from the work of Prof. Paul Leeson of Oxford John Radcliffe Hospital and his colleagues who have developed a system that they claim could save £1.1 billions of pounds by enabling the heart diseases to be picked up much earlier.

The technology will start to be available to NHS hospitals for free this summer and Prof Paul Leeson –”Data indicates that the system had greatly outperformed his fellow heart specialists.” Of 60,000 heart scans carried out each year, 12,000 are reportedly misdiagnosed at an estimated cost of £600million.

This story appeared in a Daily Telegraph article in 3rd Jan 2018.

Artificial Intelligence

According to the Encyclopaedia Britannica :

Artificial intelligence (AI), the ability of a digital computer or computer-controlled robot to perform tasks commonly associated with intelligent beings. The term is frequently applied to the project of developing systems endowed with the intellectual processes characteristic of humans, such as the ability to reason, discover meaning, generalise, or learn from past experience. 

This will remove a whole host of repetitive jobs across business and industry as can be seen later with the role of accountants and book keepers.

The World Economic Forum – Future of Jobs report, which looks at the 2015-2020 period and predicts which sectors are likely to see the most jobs losses.

 

Again this report like the Deloitte report lists Manufacturing and Production jobs high up behind Office and Administrative jobs. This time it lists Education and Training and Sales Related jobs as being the least in danger of automation. Once again Professional Business and Financial Operations jobs along with Management roles featured amongst the lowest at risk of automation.

 

Finally the work of Frey & Osborne from Oxford Martin University has been heavily quoted by many commentators and an interactive graphic produced by Bloomberg enables readers and recruiters to enter a job type and see the likely risk of automation to the role. We’d encourage you to review key jobs that you recruit for to see their likely risk of automation over the next few years.

The link is www.bloomberg.com/graphics/2017-job-risk/

Bloomberg quote Frey & Osborne:

Researchers at the University of Oxford, for example, estimate ” that nearly half of all U.S. jobs may be at risk in the coming decades, with lower-paid occupations among the most vulnerable.”

Their graphic for example shows that Accountants and Auditor though well educated and well paid were at a 94% risk of their jobs being automated.

Whilst this has been questioned by many you only have to look at the accounting tools now available from Xero or Sage to understand how through AI and machine learning this can easily happen.

As one of Sage’s Top 100 Global Business Influencers I contacted their product development people to see if they had any thing they could offer me to help explain this and I am delighted to say they shared with us details on their chatbot Pegg.

Pegg:

“..is your smart, admin assistant that lives in your mobile, so you can record your expenses anywhere, anytime, without hassle or entering paper receipts.”

“Because of clever integration, simply message Pegg with your expenses and it automatically accounts for it in Sage One.”

With bank feeds now entering all your credit card and bank account transactions directly into Sage One and with rules on how expenses from specific suppliers are handled, the whole process of book-keeping and receipting your transactions can be simplified and semi-automated. It becomes very easy to see how with further AI this whole accounting process could be fully automated in the next 5-10 years.

In the UK Carl Frey, co-director of the Oxford Martin programme on technology and employment at Oxford University, estimates that as many as 35 per cent of jobs in the UK are at risk of loss.

The message is similar.

The top ten of jobs most at risk of computerisation feature

With the top ten jobs at least risk from computerisation being

Source – Taken from REC – Future of Jobs

Again health and social care as well as sales professionals feature very strongly.

Autonomous Vehicles

Much has been said and written about this subject in recent months.

Elon Musk the CEO of Tesla Inc.claims totally autonomous vehicles will be on the roads in 2019 and they will be 10x safer than human drivers.

In November 2017 the UK Government announced Driverless cars will be on Britain’s roads by 2021 as a result of sweeping regulatory reforms that will put the UK in the forefront of a post-Brexit technological revolution as reported by the Guardian

And in the same months Volvo signed an agreement with Uber to supply them with tens of thousands of autonomous driving compatible base vehicles between 2019 and 2021..

Then in December 2017 Tesla launched their new “Semi-Truck” whose power and torque are vastly superior to all diesel engined vehicles.

What this means for employment in the transportation industry who knows as many working in the sector refuse to see any significant changes in the next 10 years. This nevertheless offers a huge opportunity for a disruptive business model so lets wait and see.

However the PWC UK Economic Outlook also estimate that transportation and storage (56%), manufacturing (46%) and wholesale and retail (44%) have the highest risk of automation the overall UK economy has a 30% risk of jobs being automated.

This compares very favourably with Germany 35% and the US 38%.

Human Qualities

Some of this discrepancy between the various reports can be explained by the unique qualities that we as humans have.

The reports are generally in agreement that the following are the human qualities that are the areas that machines will have difficulty automating:

• Emotional Intelligence
• Critical thinking
• Collaboration
• Emotional Support
• Original thought
• Abstract concepts
• Conflicting concepts
• Persuasion

The future is also not all bleak as clearly there are many new jobs being created. The IDC sees 2.1m jobs being created in the US by technology augmenting workers in the world of CRM over the five years to 2021.

AI has the potential to make many jobs more productive and remove a lot of the mundane and boring elements of jobs.

A key conclusion worth noting is how to protect yourself from unemployment which is listed as education.

The World Economic Forum estimates that those with GCSE2 have a 46% risk of losing their jobs whilst those with degrees are only at a 12% risk.

 

What we are going to see are jobs being defragmented and the tasks that can be automated being undertaken by machines and tasks that requiring humans being consolidated into new roles.

 

In fact the World Economic Forum’s Future of Jobs 2016 estimates that 65% of primary school children will end up working in jobs that don’t exist yet.

Future Scenarios

Part of the reason for the variation in predictions comes form the fact that there are a number of scenarios being considered.

There is a great Infographic from Salesforce, which illustrates this:

In the first scenario they call “False Alarm” new jobs emerge slows and current jobs are displaced slowly so nothing changes much. Personally I see this as the least likely of the four options.

The second scenario called “Jobs Crisis” has current jobs being displaced quickly creating unemployment and due to inertia, public sector intervention, private automation tax and heavy resistance to new technology new jobs are created slowly.

In the scenario called “New Economy” current jobs are displaced quickly and new jobs are created quickly. We would need to invest in training and retraining. For some this is exciting and dynamic but for many this would be too chaotic and could be very difficult for large parts of our society to cope with emotionally. This scenario if too rapid could see violent responses from some sections as well as huge increase in mental health issues for society.

The final scenarios “Labour Shortage” characterised by investment in training would see new roles created fast but traditional jobs displaced slowly. This would impact UK economic growth and could be catastrophic in the long run on our global competitiveness.

Personally I believe “Labour Shortage” and “New Economy” are the most likely scenarios and believe we will spend time potentially in both of these over the next 10-15 years.

Impact on Recruitment Process

As well as the sectors in which we supply and operate all this new technology will also impact the process of recruitment itself.

Source – Taken from REC – Future of Jobs

• AI – Will Increasingly be used to identify and sift candidates, for screening, compliance and skill verification
• Video Interviewing – Will become common as it removes geographic boundaries and speeds up the process
• Collaborative hiring – Tools to enable individuals to collaborate objectively in the process whilst operating in different geographic locations and time zones will become common, particularly amongst multi-nationals.
• Gamification – Technology to enable candidate testing during process
• New Resourcing Platforms – New ways of working to deliver efficiencies

All of these process changes and more will increasingly be used in the next 10-15 years. In many cases they will require high levels of capital investment taking them out of range of the SME Niche and Generalist Recruiters further adding ammunition to the armoury of the large MSP/RPO Recruiters enabling them to further penetrate the large corporate markets and drive down costs and increase profits.

In addition large corporates may choose to use these tools to insource these large contracts and deliver the efficiencies back into their own businesses.

The Consequences for future of recruitment

Threats to the future of your Recruitment Agency

If we reflect on the evidence that has been presented so far what we can conclude is that as well as destroying traditional job roles and job families the new technology will create new job roles and new job families of jobs.

As we have seen large numbers of roles are likely to disappear in transportation, manufacturing and wholesale/retail sectors. In addition some of the professional sectors will see many menial and semi-skilled roles automated. A lot of these roles will be the creation and preparation of data.

At the same time jobs will be created in health and social care sectors, education as well as highly skilled roles in the high tech, scientific, technical and professional sectors. Many of the professional, technical and scientific roles will be in the interpretation of data where there is often no clear right or wrong answer and it requires a careful balance.

The “Job-Crisis Scenario” discussed above presents a huge threat to recruitment agency businesses large or small with traditional jobs displaced quickly and new jobs created slowly. In this case we would see large-scale unemployment, which would be good for no one or any economy.

Another threat for many agencies would be huge market disruption that prevented consultants tracking where the skills-gaps were or being able to service them. It would also prevent employers businesses being able to plan and predict their future and would make recruitment highly volatile and uncertain which in turn would disrupt growth and economic expansion.

A highly dynamic situation where skills-gaps were created and disappeared too quickly would make the conditions almost impossible for niche consultants to develop their skills and deliver a high quality and reliable service to employers.

Finally another threat to all recruitment agencies would be if the dynamic changes disrupted long-standing customer relationships removing continuity and allowing their competitors to move in.

Opportunities in the future for your Recruitment Agency

In the opposite scenario “Labour Shortage”, where new jobs emerge quickly and current jobs are displaced slowly the opportunities for niche agencies to benefit will be huge. Significant opportunities would also exist for generalist or Managed Service Recruiters as well.

Also The “New Economy” scenarios would also create sizeable opportunities for recruitment agencies to thrive through servicing their clients needs by continuing to leverage their skills and expertise either as a niche recruiter, generalist or Managed Service Recruiter.

In-house recruiters in both scenarios would have a key role to play/

In situations where these skills gaps are created rapidly then highly skilled expert recruiters who know their niches well or have strategies to recruit at volume should prosper.

Such a dynamic market is likely to create situations where agencies with less agility or expertise could see their customer relationships disrupted or lost to agencies that are better able to respond to the rapidly changing market conditions.

It proffers the opportunities for some agencies, (niche, generalist or MSP/RPO) to strike up Strategic Partnerships with some employers who seek continuity of service and supply.

Finally it also creates a huge opportunity for all agencies to offer consultancy to employers on how to create new roles that can easily be resourced and build resilient resourcing strategies that help businesses deliver ambitious growth plans.

It does call for a different type of selling however. Agencies will need to learn “consultancy sales” skills as well as strategic relationship sales skills.

It may require different sales professionals to the ones currently employed by some agencies which some might find extremely challenging.

Conclusion

No one knows what will actually happen and to a degree there is still time for us to avoid many of these pitfalls and maximise the opportunities that this new industrial revolution will create for us as the recruitment community as well as society as a whole.

One thing however is certain and in the words of Bob Dylan,

The times they are a changing.

As recruitment agency owners, directors and talent leaders one thing you would be wise to do is not ignore what is happening and wait for the future to become clearer before acting.

The reason….because it may never be clear.

We are moving into a world of constant and dynamic change.

My advice to all our clients is monitor, observe and where you feel there is a clear shift respond to opportunities or mitigate any risks to your business.

This may mean:

• Diversify your niche sectors.
• Move form being a local generalist to being more niche focused.
• Recruit consultants who are more responsive to their clients and the market.
• Seek out employees that are more flexible and innovative.
• Build resilient client relationships.
• Review your business operating model.
• Reduce your office network.
• Change your CRM/Mid-office technology platform.
• Review your consultant recruitment and training strategy.

It may also mean in the medium term moving away form sectors such as:

• Logistics
• Warehousing
• Manufacturing
• Low/semi skilled temps

It could mean exploring sectors such as:

• Hi-Tech
• Health and Social Care
• Education
• Technical/Professional

The recruitment agencies that thrive and prosper in the next 15-20 years and therefore the entrepreneurs who go on to succeed will be the “fittest”.

To paraphrase Charles Darwin –

Those entrepreneurs whose businesses that “have the closest” market “fit, are therefore the ones that will leave the most copies of themselves in successive generations” and are the ones that will survive.

Future of Recruitment 2020-30 – Your Future Starts Today – RecExpo 2018 Download

This week Ian Knowlson spoke at the Recruitment Expo at Olympia, London on the Future of the Recruitment Industry 2020-2030.

During the talk Ian discussed many topics including the future of recruitment for Managed Service Providers and Niche Agencies as well as the threats to their businesses future and the opportunities for them.

Ian’s talk received overwhelmingly positive reviews from those in attendance with numerous requests for copies of the slides.

Please complete the form below if you would like to receive the files.


Tips on scaling up your recruitment business (part two)

Tips on Scaling up your Recruitment Business (part two)

 

The second biggest challenge recruitment business owners experience is when they decide to appoint a manager and relinquish direct control of their sales team.

This can be a challenging and extremely stressful time, like leaving someone else to bring up one of your children. Many of us who have gone through this process are keen to not be controlling like the managers we have worked for in the past and give our new appointees the freedom to manage in their own style but at the same time if the sales go backwards this can be very worrying.

Typically many directors and business owners fail at their first attempt at this.

Often this is because the new manager has not been prepared for the role. They have received no training and frequently there is an assumption on the part of the owner/director that if the owner could do it then the manager can too.

This is the most common mistake I see as a coach. Sadly this is rarely the case, as often the new manager does not have the same abilities, drive, passion and commitment to the role as the owner/director.

In addition owners and directors do not recognize that their role has changed as well. They have a tendency to step back totally from running the business without properly preparing their manager.

The first step to resolving this situation is to understand that your role as the owner/director has changed from being the team manager of business to being a coach yourself. Like modern sport managers who have themselves become coaches, Warren Gatland, Eddie Jones, Arsene Wenger, Pep Guardiola, Jorgen Klopp and Mauricio Pochettino are all coaches first and foremost and you too must be a coach too.

You may find it helpful to accept that your role is to guide your new protégé through their first few months. They are likely to be very inexperienced and do not know all the challenges of managing your business. Very often they do not initially think like a manager but as a consultant. They too make the mistake of assuming their consultants think and see the world like they do. So everyone is learning.

As the owner/director you still need to keep a handle on the businesses KPIs but instead of intervening directly you have to work with your manager to make the corrective actions. It may help to have them analyse the KPIs themselves and come to you with the conclusions so you together can decide what challenges need addressing and discuss a corrective action plan.

Often I run workshops with newly appointed managers and directors where we have the managers’ review the key performance figures of the business. In the most recent workshop managers and team leaders came to the session with the following data:

Best Quarter Ever (X date till Y date) Last Quarter Last 30 Days
Jobs
CV Sends
Interviews
Deals
Total Sales £
Average Fee £
CV:Int
Int:placement
Jobs:Placement

 

By making the comparisons themselves prior to the session, in every case the managers were able to self-diagnose their issues and self-correct their teams performance by making adjustments to where their teams focus needed to be.

Each manager then conducted the implementation of the corrective actions after the workshop with their team members. Not every manager succeeded in getting the desired response from every member of their team but that is another story.

The secret as a director/owner is to work through your managers and to have your managers ask the questions that you would do. The skill is to ask the right questions, often these will be rhetorical and designed to get the manager to analyse the business KPIs themselves.

Clearly if you do not record this sort of information historically you will find this approach more challenging but the principle remains the same.

Investing in some coaching training for yourself and perhaps your managers is essential if you want to transition this period with minimal impact upon your businesses bottom line. Coaching is about guiding the other person. The GROW coaching model is a great starting point. This breaks the coaching down into four elements:

  1. Goal   – Agree with your manager the outcomes you wish to achieve. What does “good look like”.
  2. Reality           – investigate with your manager through asking questions to understand where the business is and what are the issues.
  3. Options – explore with permissive language patterns what options the manager has to remedy the issues. It is helpful to avoid “telling” the manager what to do.
  4. Way forward – Use SMART goals to gain commitment and ALWAYS have your manager write them down. People are 65% likely to commit to them.

 

A good lesson to remember as the owner/director is that delegation is not abdication. By that I mean you are still responsible for directing the business though you are now responsible for managing through another person.

You need to continue to think for your manager as well as anticipate the problems and pitfalls that they are not aware of. It is rare that businesses owners can recruit a highly experienced manager from outside the company who can transition into this role with minimal impact on the performance.

Typically businesses promote from within and often the first port of call is your top biller who sadly may not necessarily have the qualities and attributes to manage.

It is extremely rare for newly appointed managers to be successful without themselves receiving training in the basic fundamentals of management. We at the Recruitment Training Group, offer a four-to-five day future leaders training programme.

Our courses are bespoke but typically cover what we all regard as the bear essentials a new manager needs:

  • Leader Behaviour: Focus on            Self-awareness and development: Introduction to leadership – An assessment of current leadership style, appraisal of style, and identification of tools and processes to assist them with improvement in style to become a more effective leader.
  • 2 Leader Performance: Focus on delivering results: Developing Performance – measuring performance, assessment of where managers are now and how they want to develop and how they want to develop their teams. Also Time Management – A Key part of a billing managers role is to become experts at managing their own time and that of their teams. We explore this and help guys develop and implement their own framework.
  • 3 Team Performance: Focus on team deliverables and behaviour: Input/Outputs – what needs to be achieved, agreeing targets, minimum standards, competencies and KPI’s, activities – behaviours – results. Communication and motivation, how to give feedback, constructively discuss difficult subjects, managing under performance, clarification of what under performance is related to competencies and KPIs.  Team building stages and Developing Team Talent. Team Meetings – purpose, inputs/outputs, frequency, agenda, chairing meetings
  • 4 Leading High Performing Teams: Focus on alignment, responsiveness and adaptability to change: Inspirational Leadership, Team Values, Aligning Team Vision with Company Objectives, Strategic Planning, Agreeing Strategic Team Goals aligned to shared Vision and Values, Targets, KPI’s and Competencies and Monitoring Tools. Leading Teams through Rapid Development/Growth, responding to internal and external factors and driving change through the business.  Types and stages of change, helping others adapt.  The Leadership skills needed for identifying the need for and defining the nature of change and managing change.
  • 5 People Development Focus on Developing Individuals: The benefits of nurturing talent – systematic approach to people development, identifying skills’ gaps, selecting the right way to develop someone, identifying individual learning styles. Coaching: the benefits of coaching, what is it, structuring a coaching session; coaching techniques and skills
  • 6 Resourcing for Teams Focus on selecting the right people: Hiring the best – competency based interviewing, UK Legislative Framework, Ensuring Recruitment ‘Best Practice’ process, Hiring and on-boarding.

We will also work on an action plan for delegates to take back to your desks to aid effective implementation.

Whatever route you choose there are trainers and coaches out there that can help you and I would encourage you to find one and work with them as you grow your business.

The extra cost of an experienced coach/trainer is rarely more than one permanent placement or 10% of your monthly temp/contract GP. The cost of failure is often 10-20 times that amount so it is usually money well spent.

 

 

Top Recruitment Sectors for growth in 2018

Top Recruitment Sectors for growth in 2018

 

It is five years since I wrote my amazingly popular blog Top 5 Recruitment Sectors to be in for the next 5-10 years. At the time unemployment was still rising across most of Europe and the UK economy flat-lining.

25,000 views later things have transformed somewhat and we have seen some dramatic changes in the World.

Economic positive growth has returned to much of the world economy and the OECD outlook for 2018 is very positive. The UK voting for Brexit and the US voting for Donald Trump have seen a huge shift towards populist voting and a rejection of the establishment and globalisation and sadly the growth of extremist terrorism.

Overall however I believe our predictions have been pretty accurate.

At the time our predictions were:

  1. Information Technology
  2. Engineering
  3. Energy, Oil and Gas
  4. Healthcare
  5. Emerging Technology application

Anyone who moved into these sectors in 2013 would have seen a pretty successful period of opportunity and growth perhaps only energy, oil and gas sector agencies may have been disappointed.

This year I have accepted a few speaking engagements at conferences, the first of which is Recruitment Expo 2018 in London at the end of January.

There I will be talking about the Future of Recruitment 2020-2030 and will be sharing my views on what the world of employment and recruitment will look like in 2020-2030? What changes are likely and unlikely? Will Artificial Intelligence and Bots replace everyone and everything? Will recruiters still have a job and if so what will that job look like?

UK and Global Economic Dynamics

As always it is important to state the economic forecasts on which we are basing our predictions.

2017 has seen UK economic growth come in at around 1.5% pretty much in line with what we predicted last year in our blog Top Recruitment Sectors for growth in 2017

and above the 1% some people feared. In fact JP Morgan estimate it will end up at 2%.

For 2018 most commentators are making forecasts between 1.4% (Chancellor of the Exchequer) and 2.2% (Capital Economics Consultancy). We have chosen to base our forecast on a UK GDP Growth rate of 1.8%, which is the median. We believe the biggest impact on the recruitment sector will be the pervasive skill shortages across the UK that will see salaries and freelance/temp rates rise strongly in 2018.

Globally the picture is positive which has seen strong growth in the world’s stock markets. The BBCs Economic Editor Kamal Ahmed characterises it as …

“the gentle recovery in economic growth and increasing demand for companies products across the major drivers of the world economy – Japan and the Asian emerging markets; the Eurozone and, most importantly, America.

Secondly, there is the continuing stable expansion of that other engine of the world economy – China.

It is the first time since the financial crisis that such a growth “synchronisation” has happened.

Thirdly, there is little evidence of increasing inflationary pressures, meaning interest rates are likely to remain at close to historically low levels.”

Taken from BBC Website

All in all we believe the economic outlook for recruiters will be favourable with one or two challenges caused by the roller-coaster headlines associated Brexit negotiations.

On this our advice is simple to our readers and clients.

Stay focused on your locus of control and do not become distracted by things like Brexit over, which you and your teams have no influence and no control.

Top five Sectors for high growth in 2018

 

No 5. Construction

With several of our clients operating very successfully in this sector we’d love to be more positive as we do see a huge skills shortage in construction and therefore the opportunity for strong agency growth is very high.

There is however a large amount of uncertainty caused by Brexit over new

infrastructure and commercial projects.

The recent figures in December (published in January) from IHS Markit on the Purchasing Managers index pointed to a mixed picture with Commercial projects index contracting, the infrastructure projects index stable but house building index riding high. Overall the picture was positive with a growth figure of 52.2 (any figure over 50% is positive growth). This was the third month in a row and:

There were positive signals for the near-term business outlook, with new order growth reaching a seven-month high and job creation the strongest since June

The sectors employment index was also positive so overall we see the future demand for staff from projects will remain healthy. What makes us even more positive is the migration figures which show that many of the Eastern European workers from Poland, for example, have returned and reduced the available talent pool.

With the overall demand from UK Construction healthy for next six months and availability of skills weak we see this as positive for those recruitment agencies in this sector though given the uncertainty we would not be encouraging too many businesses to risk new entry into the market currently.

There are many new infrastructure projects planned in 2018-19 and as we move towards getting clarity on the post-Brexit world we believe investment will return to the sector.

Overall this is our reason placing Construction at No. 5 this year.

No 4. Healthcare

We have include Healthcare for the first time in a couple of years as the sector appears to have shrugged off the challenges and uncertainty surrounding IR35 and the demand for health professionals seems once again to be growing rapidly and at a steady pace.

This is predominantly in the area of temporary nursing and medical staff, which according to Kevin Green REC is a result of the strain on NHS Trusts.

 

“Nursing and medical staff remain the most in demand for temporary roles – further evidence of the strain the NHS is feeling on filling vacancies.

Whilst the above quote relates to his comments in the December 2017 IHS Markit/REC Report on Jobs what is clear is that this is a trend that is unlikely to subside in 2018 and if anything likely to accelerate as the demand for healthcare services shows no sign of abating.

As can been seen there are clearly huge supply issues as stated recently in the Guardian 13th December 2017

While the NHS in England has 40,000 more clinical staff than in 2012, it is short of 42,000 nurses, midwives and therapists, according to Health Education England, which has drafted the NHS’s first strategy in 25 years to tackle chronic understaffing.

HEE, the NHS’s staffing agency, also warns that the health service workforce, which already stands at 1.4 million, will need to increase by 190,000 by 2027 unless the rise in illness recedes.

Bank and agency personnel cover most of the vacant shifts. But HEE warns that patients could receive poorer care because unavailability of staff is so common that 8% of vacant shifts go unfilled, thus “increasing pressure on existing staff and potentially impacting on quality”.

The HEE Report also highlighted:

Shortages are now so acute that:

  • The NHS is short of 42,000 nursesmidwives, physiotherapists and occupational therapists.
  • A widespread lack of nurses is most severe in London, where 15% of posts are vacant, and lowest at 8% in the north-east.
  • There are 1,674 (26%) fewer district nurses and 842 fewer learning disability nurses than in 2012.
  • GP numbers have fallen by 1% over the last five years despite a key government pledge to increase the total by 5,000 between 2015 and 2020.
  • Almost one in three paramedic jobs are vacant across England.
  • The number of nurses leaving the profession rose from 7.1% in 2011-12 to 8.7% last year.

The NHS has become much better at controlling off framework spend and so the barriers of entry for non-framework providers are high and we see them remaining so if not increasing in the future. This sector therefore has good growth opportunity for framework providers.

 

No. 3 Manufacturing

In the final quarter of 2017 manufacturing enjoyed its best quarter for three and a half years and the outlook given the reduction in the pound is for this to continue for the next 2-3 years.

Manufacturing has certainly been a major winner of Brexit and exporters particularly are seeing a renaissance in their fortunes, which bodes well for UK Plc. in the years to come.

Lee Hopley, chief economist at manufacturers’ organisation EEF, said: “UK manufacturers were, in the main, in good shape as 2017 came to a close, with the majority of sub-sectors enjoying growth.

“Manufacturers’ expectations for the year ahead point to output and export growth being maintained through this year on the back of continuing support from a burgeoning global economy.”

This is a result of two big trends; a weaker sterling caused by Brexit, which is making exports cheaper and the expanding global economy particularly China, Europe and the USA.

Against this back drop we must take note of the supply of workers in the sector which according to surveys in 2017 is reaching critical point with 67% of manufacturers in the summer reporting concerns that skill shortages were affecting their ability to grow and met demands for new orders.

This reinforces Kevin Green’s comments that we will see significant increased pressure on salaries in 2018.

The supply pressures were reiterated by the CBI in October 2017 following a survey of 450 members stating:

The number of manufacturing firms citing a shortage of workers for limiting their investment plans is at its highest for four years, according to a survey by the CBI.

In another survey of 371 manufacturers, 28% said order books were above normal while 11% said they were below normal. The balance of + 17 points was the joint highest on record and well above the long-term

The CBI stated that order books were particularly buoyant for the motor vehicles and transport equipment, and mechanical engineering sectors.

Anna Leach, the CBI’s head of economic intelligence, said: “As we head towards the end of 2017, UK manufacturers’ total order books remain at a near-30-year high, with export order books remaining at their strongest since the mid-1990s.

Taking all this evidence into hand we are confident that 2018 will be a great year for recruitment agencies servicing the manufacturing sectors.

We have some concerns about the medium to long term as we believe this critical skill shortage will encourage organisations, with interest rates so low, to accelerate their automation plans introducing Bots, Augmentation, Drones, 3D Printing and AI to increase productivity within their manufacturing processes.

For this reason we would encourage recruitment agencies to seize this opportunity to move into these key niche sectors to future proof their business and take advantage of the premium fees that will be available.

 

No. 2 Engineering

As stated in previous years the top two sectors offer by far the greatest opportunity for growth than any others. This year however we do see manufacturing and healthcare starting to close the gap and for once it is possible that one of them could by the end of 2018 break into the top two.

That said the underlying demographic issues that we have highlighted in previous years of:

  • An ageing workforce of baby-boomers leaving between now and 2025.
  • The lack of STEM graduates over the past 10-15 years means the talent pool to replace them is woefully small and undersized
  • Brexit migration changes have seen the number of foreign nationals from EU countries returning to dampen the talent pool
  • The under investment in training over the past 10-15 years means the number entering the market to replace those exiting is totally insufficient.

We have stated this before but the scale of the problem is estimated to be:

Research suggests that 182,000 additional workers are needed to plug engineering-focused graduate and apprentice positions every year until 2022, according to Engineering UK.

 That’s over 1m more engineers.

According to Engineering UK; Currently the UK produces only 46,000 engineering graduates each year. There will also be demand for around 69,000 people qualified at advanced apprenticeship or equivalent level each year. Yet only around 27,000 UK apprentices a year currently qualify at the appropriate level.

There is light at the end of the tunnel but it is many years off and that is the introduction of the apprenticeship levy is forcing employers to look at investing in training, The numbers of higher apprenticeship scheme (degree equivalent) and the number of students embarking on these is growing and will accelerate over the next 2-3 years.

Sadly for employers these apprentices are 5-8 years away from making a significant impact on the skill shortage but it’s a start.

As with manufacturing, we see automation, AI, augmentation and bots having an impact, which will also help the UK productivity figures that are woefully behind the rest of the G7 countries.

 

No 1. IT and Technology

Once again IT and Technology tops our top five list and we do not really see this changing before the end of the decade.

All our clients operating in these sectors have healthy grow figures, typically 30-100% year on year. Their placement fees and margins are 18-22%, and their average fee values approaching £8-10,000 per deal.

Candidate shortages pervade the sector and the list of critical skills that people cannot source grows monthly.

Our IT & Tech Niche Recruitment Agencies tell us that the following are the top ten they predict for 2018 in no particular order are:

  • AR Development skills
  • Data Scientists
  • Cyber Security Experts
  • Mobile App Developers
  • SaaS in the Cloud Professionals
  • Applied Machine Learning
  • Multi-faceted Programming languages (Python, JavaScript)
  • Data Analytics
  • Digital Transformation
  • AI Experts

The principal drivers in this sector that are causing the skills shortage are:

  • Historical shortages of IT professionals
  • Acceleration of development and adoption IT & Tech products by business
  • Push for commercial and competitive advantage
  • Push for the next disruptive business model
  • Lack of sector training
  • Baby Boomer Generations leaving the sector

These pressures are global not just UK. In fact it could be argued that the UK leads the world in many of these micro niche sectors such as Digital Transformation and Development, FinTech, AI, AR and Big Data.

For those businesses already in this sector we see 2018 being a healthy year for growth and margins.

 

 

Once again that’s our predictions for 2018.

These forecasts are based upon our hands on experience of working with 30-35 recruitment agencies across all sectors during the past 12 months. With all of them growing at annual rates of over 30%+ year-on-year and some 200-300%, we believe we are well placed to know the best sectors to work in.

As with 2017, despite Brexit we continue to see healthy times ahead for the UK Recruitment Market but as we move beyond 2020 with Brexit and the advance of technology the future remains less clear.

You may have a difference of opinion and have experiences, which are not so positive so please contact me, [email protected] and let us know or share your thoughts.

We’d love to hear them.