New research from business advisory firm Deloitte and the Association of Professional Staffing Companies (APSCo) reveals strong performance across the UK professional recruitment sector. The second annual APSCo Deloitte UK Recruitment Index found that almost 70% of professional recruitment firms reported an increase in net fee income over a 12 month period. Average annual growth across all respondents was 29%.

Katie Folwell-Davies, human capital services partner at Deloitte, comments: “Last year’s inaugural report identified some cautious signs of recovery among professional recruitment firms. This year, optimism appears to have increased but there are variations in the performance of businesses across the sector. In 2013, talent was very high on the board’s agenda and will continue to be a main priority over the next year. Results indicated that 40% of respondents had some level of M&A activity on their agenda, and it was clear that increasing headcount will be key to achieving growth and profitability targets.”

Strong growth reported but challenges remain

While these results are broadly positive, there is still an air of caution, with the majority of recruitment firms concerned about getting the talent required to cope with growth. Indeed, 59% of respondents highlighted this as their number one challenge in the year ahead, while over a third said developing a strong management team would be central to achieving success. Around half of the firms surveyed cited challenges relating to financial growth and profitability.

Global mobility of talent fuels international footprint expansion

Just under half of respondents plan to expand by opening new offices, 65% of which will be overseas. Both firms that were based solely in the UK and those with an international presence reported that the majority of new offices will also be in new markets. This indicates that UK based businesses now have the confidence to grow and that existing international recruiters are increasing their global footprint – a reflection of the growing mobility of professional talent.

Ann Swain, chief executive of APSCo comments: “Last year there was a view that growth was coming – and that it was very much on the agenda – but that recruitment firms were unsure whether it was going to last. This year’s report shows clearly that the growth has not only been achieved – but that it has been sustained – and there is consequently much more confidence in the market.”

Recruitment firms becoming more innovative

The research also showed that recruitment firms are becoming more innovative with candidate attraction techniques both for their clients and for their own firms. Initiatives include diversity and inclusiveness agendas to improve candidate engagement and connect with communities to identify talented candidates and plan for the future.

Ann Swain continues: “Flexible working has moved quite a way up the agenda of what potential recruitment consultants are looking for when they join a firm and the more forward looking businesses have updated their offerings to accommodate this. This is not just about keeping good women in the business – although it obviously helps – but also about adapting to what different generations’ motivations are.”

Katie Folwell-Davies concludes: “There is evidence that business models are evolving to operate in more innovative ways. Recruiters should seek to maximise this potential by understanding their position in the market which will ultimately help turn further challenges into potential opportunities.”