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The end of the first quarter of 2021 has witnessed a growth in confidence with respect to the potential for a significant “bounce back” for the UK recruitment sector following the challenges of 2020. This has undoubtedly been abetted by the Government issuing a “roadmap” to ease Lockdown restrictions (and also the progress of the UK vaccination programme across cohorts of the population).

This is notwithstanding the continued uncertainty arising from the economic impact following the departure of the UK from the EU and the potential implications for the sector from the UK-EU trade deal of December 2020 and also the extension of the off-payroll IR35 rules into the private sector from 6th April 2021.

We take a look at some of the key events affecting the UK recruitment sector during the first Quarter or so of the year.


As we entered 2021 there was much for the sector to be proud of even as it sought to come to terms with the challenges that Covid-19 and 2020 had presented.

On the eve of the new year, in December 2020, the REC published its UK Recruitment Industry Status Report 2019/20. This confirmed that the sector’s direct contribution to the UK economy amounted to £42.3billion in 2019 – a rise of 8% on the preceding year. And this was notwithstanding the challenges faced in 2019, not least the uncertainty of a Brexit General Election in 2019.

In the words of Neil Carberry, Chief Executive of the Recruitment and Employment Confederation,
“It’s a testament to recruiters’ resilience that they grew their contribution to the economy by a huge 8% to £42.3bn in 2019. They helped over a million people into permanent roles before the pandemic, and had just under one million staff out on temporary placements every day”.

The REC Report did however outline the significant negative impact on the sector due to the impact of Covid-19 and consequent lockdown(s). The sector experienced an eye-watering fall of 22% indirect GVA between March and September 2020. As we entered the new year Neil Carberry warned that ‘Bouncing back from falls in revenue of 20% or more will not be instant, but the trends are good, and a new economy brings new opportunities.’


The new year saw the UK operating under a further lockdown amidst record and rising number of new infections and tragic fatalities which have seen over 127,000 people lose their lives in the UK within 28 days of testing positive for Covid -19.

Data for January recorded the impact on the sector as evidenced by the KPMG and REC UK Report on Jobs Survey. It found that permanent staff appointments fell sharply in January driven by the national lockdown measures referred to above. This and the marked drop in business confidence lead to the steepest rate of decline for permanent placements since June last year.

The sector also highlighted the fact that there was renewed negative pressure on pay during January and that both starting salaries and temporary wages declined after having seen an increase in December 2019.

It should be noted that there was a further increase in the utilisation of short-term staff and that this had led to a rise in temporary billing overall for the sector.

Negative sentiment was enhanced with the ONS labour market statistics being released in February 2021 confirming the continued rise in unemployment in the final quarter of 2020.

The KPMG and REC Report on Jobs Survey in early March 2021 attested to continued challenges within the sector during February as the lockdown restrictions continued and the number of hospital admissions grew to record levels.

Permanent staff appointments fell for the second month and overall demand for staff was little changed in February, having declined materially at the beginning of the year. Another worrying omen was the finding that the growth in temporary revenue has hit a seven-month low.

Economic sentiment was not helped by reported precipitous falls in UK trade with the European Union. The ONS reported that UK-EU trade had seen a 40% fall in exports in January 2021 compared to December, and imports from the EU were down by 28% over the same period.

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Amidst this backdrop, and hope engendered by the vaccine rollout and the announcement on 22nd February of the Government’s measured roadmap to ease lockdown restrictions, the Chancellor delivered a Budget in early March designed to give the economy a short-term boost.

This included extension of the Coronavirus Job Retention Scheme for 5 months to the end of September 2021 as well as deferral of business rates and provision of VAT support. The Chancellor also confirmed that eligible self-employed workers would be able to receive two further grants under the Self-Employment Income Support Scheme and that the Government would be introducing a £7million fund (July 2021) in order to support employers in England in respect of expanding apprenticeships. In total, the budget confirmed that £65billion would be spent in the next 2 years to support the labor market investment and recovery.

With the total support to counter the pandemic provided by the Government, taking account of all measures in the March 2021 budget, reaching £407billion the Chancellor did set out indications of measures to restore public finances. This include £25billion a year corporate tax and income tax rises by 2025 with the rate of corporation tax increasing to 25% from April 2023, on profits over £250,000.

There was, however, an attempt to soften this impact to companies and encourage them to invest as the budget included a £25billion super deduction tax break for companies.

There have also been indicators that the recruitment sector is witnessing a spur to its sentiments, and indeed performance, as we draw a close on the first quarter of the year and enter into the second quarter.

In a press release dated 8th April, the REC shared positive details emerging from the latest KPMG and REC Report on Jobs Survey.

This highlighted the steepest increase in permanent placements for almost 6 years and also pointed out that temporary billings had accelerated sharply in March. The report also highlighted that both starting salaries and temporary worker wages were growing for the first time in three months. Equally encouraging was the finding that vacancies had expanded at their quickest pace since August 2018.

There was also supporting macro-economic news from the ONS announced on 13th April which confirmed that the UK economy grew in February by 0.4% compared to the previous month, and that there had even been a partial bounce back in EU-UK Trade.

With the continuing success of the vaccine rollout and the further easing of restrictions (such as the reopening of non-essential retail) from Monday 12th April, a larger return to growth in GDP is expected and, in the words of James Smith – economist at ING – “We’re looking for a 4-5 per cent bounce in GDP in the second quarter”.


This all seems to bode well for the UK recruitment sector albeit with some challenges and unknowns ahead.

In terms of trade with the EU, it is to be noted that Exports to the EU were 22 percent lower than February 2019 levels and imports 26 percent lower than in the same month two years ago. The longer-term impact of the Brexit trade deal will clearly be something to watch closely.

The sector is also facing the challenges of the IR 35 “Off-Payroll” rules being extended (From 6 April 2021) to private sector organisations. In a recent report published by HRMC and IFF Research, most agencies had no impact whereas some agencies reported early signs of reduction in contractor numbers. A few agencies also reported early signs of a reduction in client demand for PSC contractors ahead of April 2021.

The wider economic recovery will also be impacted by the potential threat of any new Covid-19 variants’ interaction with current vaccines, the extent of economic damage caused by continued rises in Covid cases globally (the total death toll has now passed 3million) and, more locally, how UK employers respond to the end of the CJRS/Furlough scheme support in September 2021.

But leaving the last words to Neil Carberry, CEO at REC, there remains a strong basis of hope for the UK economy and the recruitment sector.

The relative health of the economy and the jobs market is now being reported by business surveys, official figures, and our own data. The figures show that hiring companies are confident about bringing people into their businesses now, and that has to be good news for all of us”.