Recruitment firms shutting at fastest rate since financial crash
Recruitment agencies are shutting for business at their fastest rate in fifteen years as companies tear up hiring plans amid rising taxes and global economic uncertainty.
As many as 120 recruitment businesses have appointed liquidators in the past six months, a City AM analysis of insolvency disclosures has found, a jump of 17 per cent compared to last year and the highest rate since the financial crash.
The collapse of recruitment agencies indicates a major nationwide slowdown in hiring and is often viewed as a precursor to a recession. It could also be a sign businesses are seeking to make their workforces leaner as they brace for the burden of higher employment taxes and minimum wage rates unveiled in Chancellor Rachel Reeves’ budget last year.
Earlier this month, the employer National Insurance contribution (NIC) rate was increased from 13.8% to 15%, while the threshold at which employers start paying NICs on employee earnings was reduced from £9,100 to £5,000. That has added tens of millions of pounds to the wage bills of top British employers, including to London-listed facilities management firm Mitie Group, which last week warned of an eye-watering £50m hit from the NIC hikes.
Last month, the Office for Budget Responsibility slashed its 2025 predicted growth for the UK economy from 2 per cent to 1 per cent, while revising up its projected unemployment rate to 4.5 per cent.
Earlier in April, London-listed Hays became the latest recruitment businesses to highlight the severity of the market challenges after reporting a 13 per cent slump in UK fees in the first quarter of the year, a steeper drop than that seen in Germany (9 per cent), Australia and New Zealand (11 per cent) and its other global markets (7 per cent). Hays said it had cut a fifth of its UK headcount compared to last year.
“Given increasing macroeconomic uncertainty, we expect near term market conditions to remain challenging,” Hays said, adding that the difficulties were “likely to persist” into 2026. The firm’s stock is down 16 per cent over the past month.
A Treasury spokesperson told City AM: “The last few years have been incredibly difficult for business. That’s why this pro-business government is determined to improve the total business environment.
“We know the vital importance of businesses to our economy which is why we are focused on creating opportunities for businesses to compete and access the finance they need to scale, export and break into new markets.”