Recruitment startup scene 2020
Key takeaways from 2020
- Number of new recruitment business registrations in 2020 increased by 3% on 2019 numbers
- Q3 & Q4 witnessed the highest amount of new recruitment business registrations, 11% and 9% respectively in the same period 2019
- Healthcare is the most popular sector
7,691 recruitment entrepreneurs registered their business in 2020, a 3% increase on 2019.
In what was an unprecedented year, to beat 2019’s levels which were the third highest on record, is incredible and broadly outstanding to three factors:
- The rise of the hyper-targeted, niche agency
- Unfortunate redundancies as businesses are faced with difficult decisions
- Lockdown life, for better or worse, is conducive to starting a recruitment business
1: The rise of the hyper-targeted, niche agency
Over 70% of the businesses operating in the £39bn recruitment industry are micro and “small” SMEs, many of which specialise in niche sectors. In the past three years over 20,000 new businesses have registered on Companies House with 80% still active.
As Covid triggered new ways to work, so too will it continue fragmenting the composition of the industry. Larger businesses face challenges regarding office space, training and developing junior staff and recreating the alchemy that happens when sales teams are together.
Experienced recruiters with developed networks who are faced with an unknown return to the ‘norm’, may consider the prospect of going solo, or teaming up. Experienced professionals may collaborate on forming hyper-targeted recruitment supergroups.
Data from over 1,500 downloads of Sonovate’s ‘guide to setting up’ ebook in 2020 revealed that 44% of recruitment entrepreneurs intend to set up their new business models within one month. Healthcare, IT and construction being the hottest sectors**
Education, social care, transport & logistics, hospitality & catering, human resources, admin, secretarial & PA and manufacturing make up the ten most popular sectors to specialise in.
2: Rise in redundancies triggers new business starts
Research from SHL discovered that an extra 85,000 new businesses were created in 2020. As the impact of Covid increased, business owners were faced with hard decisions to make. HMRC figures revealed that there were 820,000 fewer employees on company payrolls in November than in February. Whilst more than a third of the redundancies have come from the ailing hospitality sector, Covid has impacted all industries.
In terms of quarter growth, 2020 is neatly represented in two halves.
- H1: With Covid uncertainty at its highest, the primary thought was to protect personal and business health creating a reduction in new recruitment businesses.
- H2: As people adjusted to a ‘new norm’ the desire to start a new business was likely born out of two reasons; circumstantial and / or accelerating / following an intended path.
3: Choosing a new path
Enforced “work from home” has made the impossible possible for many. Questions such as “can I?” are now replaced with “do I want to?”
Mark Manson, NYTimes bestselling author of The Subtle Art of Not Giving a F*ck and Everything is F*cked: A Book About Hope, summarised what 1,300 people said about their life lessons for 2020.
One of the key takeaways was “You Have No Excuse to Not Be Who You Want to Be”
“What have I learned from 2020? That we do what we do. That there’s little point saying, ‘When I’m rich I’m gonna…’ or ‘When I retire I’m gonna…’ Because you won’t. If you’re not doing it now, you won’t do it then. I always kidded myself that if I were locked up for years, I’d get scarily fit and read all the great books of history. Instead, in lockdown, I got fat (well, fatter) and read no more top-notch literature this year than any other year.”
The UK recruitment industry is the third largest staffing market by revenue after the US and Japan. It also has low barriers to entry and thanks to Sonovate and a handful of businesses, accessing finance is no longer an issue.
Couple low barriers to entry with a mature ecosystem and highly skilled recruitment professionals and you have a potent recipe for success. You just have to decide “Who You Want to Be”.
Summary: The UK recruitment industry is historically incredibly resilient
It’s hard to predict how the UK recruitment industry will perform in 2021 and beyond. However, we can review historic performance for indicators on how UK recruitment might fare.
The UK recruitment industry is renowned for its resilience and weathering recessions. It highlights this by fast continual growth whilst the wider economy recovers, owing to its central role in helping businesses hire fast and hire right.
2020 represents the third highest year for recruitment startups in the last decade. With Brexit and Covid very much weighing on everyone’s minds, to achieve this level of growth is exceptional. It’s a very significant signal of just how important the UK recruitment industry is to the wider economy.
Starting your own business?
Call Sonovate today on 0207 112 4949 to chat about how we can give your new agency a rocket-assisted launch.
Sonovate in numbers:
- Funded over £2bn invoices across 40 countries
- 25,000+ contractors paid
- Over 3,000 SMEs use Sonovate. 86% have under £250k turnover.
- 3,000+ businesses use Sonovate
- Raised £25m in VC investment
*Source: Companies House
**data source: Form field data from Sonovate’s Guide to Setting Up your Recruitment Agency, 2020