Looking ahead to the recruitment market in 2019 with Kingsbridge

James Twining


John Nurthen

Executive Director

Andrew Fahey

Managing Director

SIA’s John Nurthen

Hosted at the DWF offices in London’s ‘Walkie Talkie’ building towards the end of November, Kingsbridge’s Industry Insight event convened a number of influential voices, including EY’s John Chaplin and SIA’s John Nurthen, to discuss what the recruitment marketplace will look like in 2019.

Chaired by APSCo’s Ann Swain, the day also featured a panel with the aforementioned speakers alongside Brookson Managing Director Andrew Fahey and Kingsbridge CEO James Twining.


Ann Swain

Chief Executive

Looking ahead to the recruitment market in 2019 with Kingsbridge

John Chaplin 

Associate Director

The event began with a talk on current and future trends in the UK staffing industry from John Nurthen, the Executive Director of Global Research at Staffing Industry Analysts.

Nurthen opened with a wider overview of the UK staffing market, noting that with the global staffing industry worth some $461bn in 2017 (and growing at a rate of 7% a year) the UK sits as third largest.

Furthermore, market uncertainty with the prospect of Brexit on the horizon isn’t necessarily a negative given that employers who are unsure of what lies ahead are more likely to use temporary workers. As Nurthen put it: “Brexit means uncertainty, but uncertainty isn’t necessarily a bad thing for the staffing industry.”

A note of caution was sounded about the growth of online freelance platforms. SIA data shows little structural growth in the trajectory of temporary employees in the UK over the last 20 years, meaning that if there is a shift towards finding temporary work through online platforms then the workers doing it are those who were freelancing already, and not previously permanent employees moving to temporary work.

With the value of the UK staffing industry due to hit £33.2bn by 2019, it’s no surprise that the market remains very competitive. 34% of all UK staffing agencies are based in London, 3,000 of which are based in the City alone. As Nurthen observed, this part of the capital is “probably the most concentrated staffing market in the world.”

Despite there being over 28,000 staffing enterprises in the UK (compared to just 19,000 in the USA), only 0.6% have a revenue of more than £50m. With most bringing in under £200,000, the market remains fragmented but is growing at a rate of 9% a year despite Brexit.

Nurthen also pinpointed the most attractive staffing sectors, with Marketing & Creative coming top closely followed by IT and Clinical & Scientific work. SIA are already noticing certain sectors dropping off due to the prospect of automation in the future, with Banking & Finance falling dramatically. The rise of technology is also putting other sectors at risk, most clearly Transportation & Storage, Manufacturing, and Construction.

The second half of Nurthen’s talk focused on the challenges change is creating in the staffing ecosystem. It is no longer enough to just focus on temporary staffing and permanent placements. Forward-thinking recruiters are multi-faceted and operating more sophisticated supply chains, covering a range of areas from process outsourcing to payrolling and compliance.

The market also needs to face up to the prospect of encroachment, with the likes of Microsoft (LinkedIn), Google (Google for Jobs), Uber (rumoured to be developing their own freelance platform) and even Ikea (TaskRabbit) investing heavily in staffing platforms.

The boundaries are being blurred by the rise of companies like Coople providing temporary agency workers with what Nurthen termed the “technology efficiencies” of a freelance staff provider. The parallels between traditional and online staffing companies are drawing ever closer together.

Nurthen also pointed in the direction of the recent Oxford Martin School report on the future of skills. Although jobs will not disappear, they will change (with up to 20% of occupations predicted to shrink.) It is imperative that the right education systems are in place to help people take on and understand new roles.

In addition to the above, the ways in which candidates can be discovered are much broader than they have been previously. As Nurthen notes, there are “new opportunities in a new age” – from online advertising via programmatic ads to social media screening, psychometric assessments, and chatbots. A truly modern staffing company will have a handle on all of this and more.

So what does the future hold for staffing companies? Although the technology we have at our fingertips makes business faster, more efficient and cheaper recruiters must not lose sight of the human connection. After all, Nurthen stated, “the staffing industry is a people business.”

With skills shortages and talent scarcity likely to be the other main business inhibitors going forward, it is essential that recruiters remain as open to adaptation and change as possible.

EY’s John Chaplin

Following on from John Nurthen, John Chaplin of EY spoke on forthcoming IR35 reform in the private sector and the issues the staffing industry will face, calling it the “key challenge” the sector must deal with in the next 12 months.

April 2017 saw reform in the public sector, meaning that the responsibility for assessing whether the worker should be subject to PAYE and NIC moved to the end client (or engager) utilising the worker’s services. Those same rules will be extended to the private sector from April 2020.

Chaplin called for preparation and awareness, making it clear that recruiters should be speaking to their clients and putting the right processes in place long before 2020 – some, he noted, are aiming to have everything in place for April 2019 in order to be ready well in advance.

Estimates suggest that one third of contractors in the UK should be acting under IR35, but in really only 3% do. With £550m additional PAYE/NIC raised in the first year of public sector reform, there is a strong incentive for HMRC to push forward with private sector reform. Conservative estimates put the tax gap there at £1.3bn.

After the 2018 Budget we know that the reform will not apply to small businesses and that a consultation on the operational aspects will take place in the “coming months.” It’s likely that we will not know the outcome of any legislation until at least autumn of 2019, so it’s imperative that recruiters plan as best as possible for the reform before then so they will only need to adapt slightly when the rules are clearer.

Despite that, there are still several questions up in the air. Will the ‘reasonable care’ test be changed? Will the definition of ‘fee payer’ be revisited’? How will the courts view ‘blanket’ decisions? What changes will be made to the CEST tool? And that’s not to mention how contractors will react to the changes, or what competitors in the staffing industry will do. The answers to those questions are still to come.

Under the proposed reform, there are several options open to the clients of staffing companies but as Chaplin noted: “There is either risk on one side or cost on the other. There is no perfect answer.”

The key challenges clients face are around workforce strategy (should contractors be moved to permanent?), understanding the contracting population (how much do they pay, and who to?), managing operational risk (what happens if contractors leave? What will happen if we don’t pay them what they want? What will happen if we do?), managing tax risk, and onboarding and management.

Although those challenges will remain, it does represent an excellent opportunity to have a conversation with clients to help them simplify their contractor base, as well as to help them learn from mistakes made during the public sector rollout (i.e. avoiding blanket bans, starting early, making sure that the right resources are in place, having clarity around decisions and so on). As Chaplin said, recruiters should be “part of the solution, not part of the problem.”

To put it in clearer terms, Chaplin’s advice to the staffing industry in preparation for April 2020 was simple: Act now, speak to your stakeholders, consider the wider strategy and, whatever you do, don’t underestimate the task ahead.



Following on from their talks, John Nurthen and John Chaplin joined Kingsbridge’s James Twining and Brookson’s Andrew Fahey in taking questions from the audience.

The first couple of questions taken covered Statement of Work (SOW) contracts and how more and more clients were wanting to take the SOW route. How should recruiters navigate that conversation?

The panel sounded a note of caution. Applied correctly an SOW contract works well, but they can be risky. They are not the “nirvana solution” to staying outside of IR35 that many assume. The advice was to be careful – don’t avoid them, but make sure that proper risk analysis is undertaken. Any mistakes made in this area are likely to be expensive.

The panel also noted that the SOW conversation represents a good opportunity to go in and open up the discussion with clients. It is important to encourage them to do a complete audit of their flexible workforce – to understand where everybody is and how they’re structured. Once a full risk profile is available a much more informed discussion can be had. There is no reason why the staffing company cannot do the audit with them, or even on their behalf.

A question on which agent in the supply chain is responsible for deducting NICS and tax (answer: whoever is making payments to the contractor) was followed by one about where the boundaries should lie when it comes to staffing companies providing advice to their clients.

Engage in conversation and start the discussion, came the advice, giving you an opportunity to find out what the problem is and to be honest with them in terms of whose responsibility it is to fix that problem.

Don’t be afraid to ask trade bodies like APSCo for advice and guidance, and make sure to phrase your conversation in a question format where possible, avoiding demands (‘You must do this…’).
With the emergence of more umbrella models in the public sector, the panel was asked about the potential for more regulation. Although there is no information on detail as it stands, all agreed that evolution in the market should be welcomed in the interests of increasing longevity.

Despite this, it was noted that regulation in the sector would not necessarily fix the problem of the “bad boys”. Due diligence on your supply chain and proper compliance procedure will still be essential and should not be forgotten about.

This was followed by a question on the burden of risk and how clients should deal with it. The panel agreed that it was important for the client to be able to answer a number of questions from HMRC confidently – How many contractors do you have? How many went on the payroll this year? Who do you use? What do you pay them? If a client can answer these questions, then HMRC will generally be satisfied.

Should there be an error or a lack of accountability, however, the tax, penalties, and interest will add up quickly (and can go back up to 20 years). It is also important to understand that the risk burden often falls on the agency because in many instances they are the fee payer. For this reason, and others, it is essential that recruiters find a reputable partner who will help guide them through what can potentially be a minefield.

The conversation then moved on to the CEST tool, which was rather unanimously dismissed as unfit for purpose. If information is put in correctly, and if HMRC agree with that information, then it works but it is missing the human element – essential when there are so many factors in coming to a decision. The bottom line? “Use CEST as a tool to get a better idea, but don’t use it as the be all and end all.”

The Taylor Report and the impact it may have on the recruitment industry was then discussed. The general consensus was that it will have an impact going forward, but that it is not workable today with tax and employment law as they are.

The panel also warned about the dangers of it getting hijacked as a political cause célèbre, thus nullifying the generally welcome recommendations within. The Taylor Report must be driven by financial and economic rationale, and not simply just to fulfil a political philosophy. Its future is very much tied-up with whichever party is in power at the time.

The next question addressed the issue of Agency Workers Regulation (AWR), and worker’s rights generally, if the contractor is deemed to be inside IR35. AWR does not apply because the contractor is engaging through a limited company and although IR35 deems contractors to be employees for the purposes of PAYE, it does not give them the other associated rights that a ‘standard’ employee would have.

The panel also noted that although there is generally and understandably a negative reaction in contracting circles after legislative change comes in (as happened in the public sector), and that although people will stop contracting the market will level out again after a while. There is a general acceptance that the ways of working are changing, and that all parties in the supply chain are becoming more comfortable with it.
Event chair Ann Swain wrapped up by noting the general shift in the responsibilities of a modern staffing company. Although recruitment used to be very sales-focused, there is now a greater degree of sophistication in decision making when it comes to clients buying the services of a recruiter.

Recruiters are no longer hired just because the sales people sell well, but because the company is considered as compliant and safe, and will shield the client from the more complex big-ticket issues. Put simply, the future lies in protection across the board – for the client, the contractor, and the recruitment company themselves.

Panel Discussion

What’s Coming Up?

Following on from the Industry Insight event we will, as always, keep you updated on any changes that may be forthcoming. We will also be publishing an IR35-focused white paper in the first quarter of 2019. If you’d like to receive a copy, or if you’d simply like to organise a meeting, please get in touch with your Kingsbridge relationship manager.

We’ve broken down the key points, questions and answers below. Watch the full video by clicking below