Good prospects for UK recruitment recovery

first_img Previous Article Next Article BryanFinn, founding partner of the Business Economics consultancy, outlines whyrecruitment markets are showing consistent signs of recoveryRecruitmentmarkets in 2004 have experienced a much better start to the year than at anytime since 2000. Thistime last year, there was global uncertainty surrounding the build up to thewar in Iraq and in 2002, the world economy was still dealing with the aftermathof September 11 the year before. Prior to that, in 2001, the US economy wasshowing signs of great vulnerability amid well-founded fears of a globalslowdown.Buta spirit of optimism prevails for 2004, with almost all observers expectinggrowth in the recruitment markets to return following three years of decline.Thekey driver of the recruitment markets is economic growth. TheUK economy grew by 2.5 per cent in the fourth quarter of 2003, just above thelong-term average growth rate of 2.3 per cent. Whenever the economy grows aboveits long-term growth rate, recruitment markets tend to grow as well; if itfalls below this rate, then recruitment markets will follow suit.Ofcourse, the recovery of the UK economy is not certain. Much will depend on whathappens to the global economy. And while most regions are experiencing a strongrevival, continental Europe is still suffering from low growth. TheUK recovery will also be influenced by domestic policy considerations, as UKauthorities are pursuing a much tighter monetary policy than the US or Europe. Asa consequence of this policy, the UK now has, and will continue to have, muchhigher interest rates than the US and the rest of Europe throughout 2004. Thisshould mean lower inflation in the longer term, but will also mean a strongerpound and a weaker manufacturing sector than would have otherwise been thecase.Akey indicator to watch in the coming months will be research into businessconfidence. Companies have displayed a marked lack of willingness to investover the past few years, and the recovery will not take hold unless companiesbegin to invest again in the future. There are signs that confidence isreturning to the business sector, but more is needed before we can be certainthat 2004 will mark a turning point in the recruitment markets.Onbalance, however, the prospects for a strong recovery in 2004 look good. Muchmore problematic is the outlook for 2005 and beyond. Thereare two major risks to the recovery after 2004. Thefirst is the implosion of the US economy, which would cause a major downturn inthe global economy.TheUS budget deficit is expected to reach a record $500bn in 2004. In subsequentyears, spending on social security and healthcare will absorb a growingproportion of GDP, from around 8 per cent of GDP in 2004, to more than 14 percent in 2030. The fear is that the Federal Reserve Bank in the US has keptinterest rates too low for too long in its desire to see the firm recovery ofthe US economy. The likelihood is that it will soon have to put interest ratesup, although rising rates in an election year could prove politicallyembarrassing.Thesecond key risk for the UK economy in the longer-term, is that of the hole inpublic finances growing so much that the chancellor has to cut public spending,reversing the current public spending plans. Thiswould have a big impact on public sector recruitment markets.Butthe risks to the recovery in recruitment markets are generally modest and faroff. We expect recruitment markets to grow by between 5-10% in 2004, with theprospect of further growth in 2005. Thisarticle originally appeared in Recruitment Trends & Forecasts, subscriptionenquiries 020 8652 8803 Good prospects for UK recruitment recoveryOn 13 May 2004 in Personnel Today Related posts:No related photos. Comments are closed. last_img

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