RECRUITMENT INTERNATIONAL February 2010

THOSE WHO CAN AND THOSE WHO CAN’T

The recession may have eased, but many in business feel that the credit crunch is still throttling our economy.  The fact is that the banks that were rescued with many billions of the taxpayers money are simply not lending to businesses at anything like the levels that they were before the crisis hit.
The Government has pleaded with the banks to lend more freely, but even Lloyds and RBS, banks which are now owned by the state, are failing to relax their purse strings.
The banks are lending of course; if they don’t, they don’t make money.  But they are restricting loans to low risk customers; those who have a good track record, a good credit rating and can offer security against the loans.  This is all very well, but the economy won’t thrive unless the banks take some risk.  Not the sort of crazy risk that led us into the credit crunch in the first place, they need a balanced portfolio which contains a prudent mix of low and high risk business.  This type of mixed portfolio was, after all, the mainstay of banking for centuries.  As it is, start-up businesses and those that represent any kind of risk are being starved of funds.  Ironically it is those customers who shopped around for cheap loans in the boom times, the so called “Rate Tarts” who are now finding it hardest to borrow.  The banks were quite happy to compete for the Rate Tarts business when times were good, but they don’t want to know them now that the marketplace has changed.  There is a moral to all this.  Stay loyal to one bank even if it costs you a bit more when times are good. If you do, that bank will stay loyal to you when the chips are down.

A TIME TO BE VIGILENT

There seem to be a lot of scams around at the moment.  Recruitment businesses are being fleeced by gangs of crooks who pretend to be clients and temps.  Unwitting recruiters supply bogus temps to non-existent clients and the crooks pocket the paycheques.  It is easy to blame the recession; crime always goes up when the economy falters.  However, I think there is a more sinister reason behind the growth of this sort of crime and it has everything to do with the way the industry now operates and nothing to do with the state of the economy.
Traditionally, recruitment businesses have operated in local markets.  Branch staff would always visit a prospective client and temps were always interviewed face to face.  In recent years a new type of recruitment business has emerged, one that supplies staff remotely, often nationally from a single office and sometimes internationally.  These businesses cannot realistically meet every client and interview every temp face to face; they rely instead on the telephone and the computer.  This change of working practice has presented criminals with the opportunity to work their scams.  Up to now the scams have been pretty small time, involving one or two temps and resulting in a relatively small loss to the recruitment businesses involved.  There is though always the possibility that a gang will perpetrate a much larger fraud and all recruiters need to be vigilant when dealing with clients and temps remotely.  The 1973 film “The Sting” and the TV drama “Hustle” feature intelligent gangs of fraudsters who devise complicated schemes to fleece their victims.  This is fiction of course and it may seem pretty far fetched, but companies and individuals are regularly taken in by complex scams worked by intelligent organised gangs.  Some years ago a friend of mine who imported shoes from Spain was fleeced in a scam which ran for nearly a year before they finally took his money.  Don’t assume that it is only petty crooks who are eying up our industry, take measure now to protect yourself.

OUT OF THE WOODS

In the Autumn of last year the UK was a bit of a laughing stock in Europe, we were the only major EU economy still in recession.  Things have since reversed.  The UK grew ever so slightly in the last quarter of 2009, whereas Germany and Italy stalled and Frances growth slowed.  It is clear that the European economies (and the USA for that matter) are not yet out of the woods.  It may be that we are seeing the first signs of the W or double dip recession which has been predicted by some economists.
The UK was hit much harder than most in the downturn, because we are so reliant on the financial sector.  Signs are that this sector is recovering fast and it may just turn out that we enjoy a recovery whilst manufacturing based economies like Germany stagnate.  There are dark clouds all around of course and there could be a third stage to the financial crisis if economies like Greece default on their sovereign debt.  My guess is that this will not happen.  Central Banks have learned an important lesson from the fallout that followed the collapse of Lehman Brothers.  I cannot see that they will risk the global disaster that could follow the financial collapse of a member of the EU.

Given the economic uncertainty all around us, what is my advice to recruiters thinking of expanding their businesses in response to growing sales?  Do it, but retain flexibility.  Take short leases on premises and use temps when possible.