Spring confirms gloomy permanent recruitment market

(By Anthony Miller – Friday, 24th April 2009 9:45am). Following its recent trading update (see No let up in ‘challenging’ recruitment market), Peter Searle, CEO of leading recruitment player Spring Group, confirmed the gloomy state of the permanent recruitment market in today’s IMS, reporting a 42% yoy drop in net fee income (NFI, basically gross margin) vs just a 3% drop on the contractor side of the business during the first quarter. As permanent staffing represents 20% of NFI, this dragged group NFI down 12% yoy.

I met up with Searle yesterday and had a long chat about the Managed Solutions part of the business, which includes its RPO (recruitment process outsourcing) activities. Managed Solutions, accounted for some 35% of group revenues and nearly 40% of operating profit last year. RPO is an interesting model for staffing firms as it gives them control of the client’s recruitment process. This means they usually get to choose how and where to source the candidates. Spring aims to source as many as candidates possible from its own trading companies (includes its own brand as well as Best, Glotel and others), hence keeps the margin for itself. Other RPOs, such as market leader Alexander Mann Solutions (see Alexander Mann Solutions make recruitment the process) tend to be ‘vendor neutral’ and source from third-party agencies, giving up a share of the margin. There are pros and cons here but I'm afraid we’ll have to leave that discussion for another time.