‘There’s absolutely no such thing as a European market’

Peter Crush

The recruitment markets in Europe differ greatly, so recruiters hoping to expand should understand the variation in its countries’ markets. Peter Crush explains

What happens when domestic recruitment growth (where job vacancies are now at a 15-year high, according to the REC), is well and truly back on track? Obviously, it is then time to look to see where else might be fruitful too – to find the next big untapped market.

For many, this has meant glancing to the nearest landmass – Europe, and in particular, looking at the contractor marketplace, the area poised (potentially) to follow the UK and get back up to speed again.

According to new figures released by the European Confederation of Private Employment Agencies (Eurociett), the overall picture is regarded to be improving, with the number of hours worked by agency workers reportedly rising in Q3 of 2014, while according to the European Commission’s European Vacancy Monitor (December 2013), more countries are seeing some growth.

It finds that while vacancies overall remain stable, of 21 European states measured, eight showed growth, with six (including Spain, Hungary and Portugal) showing growth of more than 5%. In Germany meanwhile, temporary agency work vacancies have now recovered to their 2010 levels.

But, for agencies looking to expand and seek possible opportunity, the message coming loud and clear from experts is this: don’t treat Europe as anything but a collection of very different countries.

“There’s absolutely no such thing as a European market,” declares Ann Swain, CEO at the Association of Professional Staffing Companies (APSCo). “There are specific countries that have a contractors market, but there are just as many – if not more – that barely have one at all, or are just beginning to catch up.” She adds: “Its history that affects politics, and politics that affects growth. The biggest danger for agencies to fall into is that it’s a homogenous group.”

The latest data (from Staffing Industry Analysts), arguably supports this. While the size of the temporary staffing market in Germany is calculated to be worth around €19.6bn, this contrasts significantly to the size of it in Italy (just €6.3 billion) and Belgium (less still at €5.5 billion). Comparing the UK to this (which is worth €28.1 billion), the market in some – particularly southern – European countries is tiny to say the least.

The reason argues Swain is that ‘Europe’ (in this context, she talks of it being a legislative construct), has increasingly moved towards ensuring temporary staff are paid the same as permanent employees. This, she argues, increasingly reduces the incentive for temporary staff to be hired over permanents. The only places this doesn’t happen is in markets where there has already been (either historically, or for sector-based reasons) an existing template for temporary, project-based labour. Areas of highest growth are restricted, Swain argues, to high growth countries like Germany, and in sectors, like IT.

For Steve Carter, director at Morgan McKinley, this is a reality he is acutely aware of. “If there’s one thing that’s constant, it’s probably that the market continues to depend more on confidence, rather than anything else,” he says. “But Europe’s legislative landscape means that France (with working time regulations particularly high on the agenda) is different from Germany, which is different again from others.” He adds: “It’s strange to think that Europe isn’t as unified in this area as people think. The advice we have is that agencies need to find a specialism and stick to it.”

One trend he has noticed however, is that in pockets where permanent hiring is starting to come back, recruiters are quickly going on what he calls “a feeding frenzy,” – this is buying up talent in large numbers while the price of it is still low. What it can create, he argues, is a situation where panic is created, and which then causes a desperate scrabble for what’s left. “Agencies need to be aware that strategic hires in mainland Europe tend to happen here ahead of the curve, with everyone else left to follow. The key is making sure you’re nimble to these changes.”

Buoyancy of the IT sectors in particular is shown by the fact that this was the leading market for private sector IT contract activity in 2012 (accounting for 45% of the total IT deal values for the year), according to research by Ovum. In 2009, the French parliament voted in favour of opening up the public sector to temporary staffing services, paving the way for temporary staffing in hospitals – and this is still expected to be another area of growth too. 

But while there is a recognition that a still-recovering Continent offers some good growth opportunities for expansion into Europe still (Poland is also regarded as a particularly hot tip, as is Mongolia and Russia still), there is one major issue that any conversation about Europe shouldn’t arguably ignore. That perhaps it’s not growing fast enough to really capture the investment attention of agencies.

“The Middle East is starting to look interesting, and Asia is continuing to provide better growth levels,” says Swain. “The point is,” she argues, “is that many agencies have already extended their reach beyond Europe, so this is not seen as the magic area for them.”

This is substantiated by APSCo research, in partnership with Deloitte, which recently showed 19% of agencies with offices abroad had them in Europe, but that they had them there five– even more – years ago. Meanwhile, some 12% now have offices in Asia.

As early as 2010 APSCo was warning that 20% of agencies expect to expand outside Europe, with South Africa being the most popular country. Firms most recently expanding beyond the European Union have included Cogs Agency (creative and advertising recruiter) which in 2013 expanded into Hong Kong. APSCo has already run delegations to Brazil and Hong Kong in the last two years. Later this month it will be going to Dubai, as well as Chile and Columbia. Parts of Latin America are also growing at 5.5% pa.

“As southern Europe catches up, there may be an opportunity,” says Swain, “but agencies might not be able to wait; and actually, we have seen some members pull out of Europe.”

So is Europe ripe for investment or simply worth steering clear of? “Agencies must do their own research,” advises Swain. “I can’t reiterate the fact that Europe is different and inconsistent enough to people. Agency heads need to understand that this is a huge region, with huge variation in opportunity that goes with it.”