High employment drives deals to access fresh talent

09 April 2019 Consultancy.uk

The UK continues to have a historically low unemployment rate, resulting in a tightening employment market and demand for recruitment services. The industry topped £12.3 billion last year, while valuations continued to rachet up. There were were 32 firm acquisitions in the recruitment services space last year, up significantly on the previous five-year average.

Labour markets globally are tightening, particularly in developed economies. At the same time, access to top talent is becoming increasingly difficult to source, as demand for that talent continues to rise. Higher demand has been one of the key drivers for acquisitions in the space. New analysis of the recruitment M&A market, from consultancy firm BDO, looks at current trends and future projections for activity in the segment.

The UK employment rate has grown considerably over the past decade, with the number of NEET decreasing, more women joining the workforce, and older people continuing to work, among other trends. Participation rates hit more than 75% in 2018, up from around 73% in 2014. The unemployment rate dropped to 4.1% last year, the lowest level in more than 40 years.

UK Recruitment Market

 

The recruitment industry has enjoyed strong growth over the same period, with revenues increasing from around £8 billion in 2014 to £12.3 billion last year. However, the growth rate for the industry is expected to stall for the coming years – the firm is projecting annual growth of 0.1% to 2024. The stall reflects deep seated uncertainties stemming from the future of the UK, from migration to internal employment in an increasingly uncertain future.

According to the firm’s analysis of market trends for UK listed FTSE recruitment companies, their performance over 2018 outperformed the wider FTSE market by a significant market during some months – the end-of-year uncertainty hit both recruitment and non-recruitment firms with relatively equal strength. The drop partly reflects market sentiment about the future of the UK.

FTSE Listed Recruitment Firms Average EV/EBITDA Multiple

 

The study also considered the multiples growth, average EV/EBITDA multiples, over the past year – which has shown considerable ups and downs. The yearly average multiple of 10.4x was above that of 2017’s 9.9x – although a 26% drop at the end of the year was significant. The drop was tied to the relative volatility in macroeconomic conditions affecting the globe, though another major contributing factor has been Brexit and political instability.

Global M&A

The global recruitment M&A market was particularly active in the UK, with 32 deals last year – a five-year high, and well above the 17 recorded for second-place US. Deal activity in the UK was focused on expertise and capacity in industrial and technical sectors, reflecting skills shortages in those segments. The US was largely focused on healthcare-related M&A, representing 25% of their market.

Overall, of the 92 deals in 2018 (a 21% drop on 2017) generalist firms were the most in demand, at 25% of the total, followed by education at 14% and engineering & construction at 13%. Software saw relatively low demand, at 2%.Investment into the UK by country

In terms of investments made into the UK, domestic investment continues to be the most dominant, accounting for 24 deals. Japan made three deals, although Brexit is seeing the country become increasingly nervous about investment. The US accounted for two deals. The longer-term trend shows that domestic investment is up on 2017, hitting the highest level in five years, while the US has reduced its M&A investment into the UK.

Commenting on the results, the firm noted, “The latest report shows the recruitment sector remains strong and continued to grow through 2018 despite facing many challenges. Notwithstanding the personalised nature of these services, the market continues to evolve, seeing traditional recruitment firms utilising available technology along with new entrants showcasing innovative platforms.”

Related: High UK employment masks troubled economy.

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PwC to create more than 200 jobs in Bradford

13 March 2019 Consultancy.uk

PwC has announced it is set to create hundreds of jobs in Bradford, as it sets up shop in the city. The professional services firm is taking over office space on Godwin Street, which will also complement its nearby operation in Leeds.

As PwC continues a nationwide reshuffle of its resources to ensure its UK firm is well-positioned to help clients in a period of uncertainty, it announced a new office in Bradford at the end of 2018. Earlier in the year, the firm said it would grow its presence in the UK’s second city in 2019, moving to a new office in Birmingham. However, the firm is expected to close six regional offices: two internal memos leaked to the British media revealed PwC’s intent to close its 40-strong Hull presence, as well as offices in Sheffield, Plymouth, Liverpool, Norwich, Swansea and Dungannon, in Northern Ireland.

Speaking at the time, Senior Partner Kevin Ellis said the Bradford location would open its doors in January 2019. At the same time, he highlighted why the firm has chosen the city, stating that it would enable the firm to meet the UK Government's priority areas for raising education standards and promoting social mobility for young people.PwC to create more than 200 jobs in BradfordPwC has since set a date to install an initial selection of staff who will take to the new office by the end of March. The locale will then see an "official launch date" for operations, which has been set for 23rd May. According to the Big Four giant, it has already recruited 60 staff for the Bradford presence, but this is set to rise to 225 in the coming years.

Will Richardson, from PwC, remarked, "Bradford is one of the largest cities in the UK, and the youngest city, offering a large and talented workforce that has so much to offer not just Northern Powerhouse growth but the UK's economic growth, too."

Commenting on a “prestigious brand” arriving in Bradford, Council Leader Susan Hinchcliffe said, "PwC want to attract the talents of the future and it's brilliant that they acknowledge that Bradford, as the UK's youngest city, is the place to do that."