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Shout99 - Freelancers, FO35, Section 660
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Agencies urged to increase margins
by Richard Powell at 19:23 26/04/02 (News on Agents)
Agencies were told to increase their margins if they wanted to survive this and future economic downturns at a recent conference at the Institute of Directors in London.
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  • Certes warns margins could change contractor and agency relations
  • Delegates from major agencies throughout the UK were told to take immediate action over margins and rates by Charles Walker, an industry commentator, during his speech at the most recent LSM Resource forum for the UK recruitment industry.

    He urged agencies to "put margins up, dump slow business and 'get tough' with clients you might currently be subsidising by operating at too low a rate."

    "Put margins up, dump slow business and 'get tough' with clients"
    Charles Walker's advice to agents
    Mr Walker warned agencies the process of getting back to previous levels of profitability would be a slow one.

    He said: "The myth of indefinite growth within the recruitment industry has died and we have suffered a bleak period of profits results from even the biggest agencies that, frankly, we would like to forget about.

    "The state of the industry is not all bad though. There's a general consensus that things are improving- but not without the occasional blip of falling back down again. The long-term trend looks good, albeit with caveats.

    "Economic recovery is on the horizon. GDP is forecast to grow between two to three per cent for the next three years."

    Mr Walker told the conference that flexible workers are essential for many companies to manage themselves properly during a recession and that in many cases clients tended to employ them when business picked back up again.

    He said: "We are a much more mature industry than we were seven to eight years ago, mainly as a result of riding the upturns and downturns over this time and shaping our services to compete adequately and provide workers accordingly."

    This brought the conference on to the subject of regulation, most of which was dominated by the industry's fears of the European Union's forthcoming Agency Workers Directive.

    Mr Walker said: "Forgetting that the Government's tax take is going to increase by 25 per cent over the next few years, just the cost of current regulation to businesses has been put in the region of 15 billion.

    "The most serious regulatory threat to our businesses at the moment is the Agency Workers' Directive which calls for the same pay and benefits for temporary workers as permanent employees, along with equal access to training schemes, etc...

    "If the regulation comes into force it will be the end of temp-to-perm fees in the UK, which would have devastating implications for agents.

    "There is already a similar law in Holland and HSBC bank has estimated it has caused volumes within the Dutch recruitment sector to have fallen between three to eight per cent annually.

    "We have the advantage that the British Government is on our side. It realises this directive will hurt jobs. EU meddling has recently seen Tony Blair team up with the Spanish and Italian Prime Ministers to oppose this and others pieces of EU legislation that pose a threat to our operability."The forum found that the main issues affecting agents in the UK are:

    • 'Further commodisation of our service;
    • lower margins;
    • debt over hang-in certain sectors (such as Telecoms);
    • events; and
    • regulation.'

    The main challenges for the industry were decided as:

    • 'A need to improve the profile of the sector in general;
    • to retain best talent;
    • to create a true consultancy service;
    • to drive up margins; and
    • to turn change to our advantage.'
    Mr Walker said: "We need to make ourselves the first port of call for graduates and we are not at all in that position at the moment.

    "Agencies have some of the brightest, most entrepreneurial people working through them in the UK- we must make sure we are giving them an opportunity to grow and manage them and their training more effectively."

    He urged agencies to take: "A top to bottom, long-term approach as regards investments in training for highly-skilled temporary and consultant workers."

    --
    Richard Powell, Shout99

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