Smaller world economies like Australia have always been influenced by the trends and influences of the larger economies such as the United States and the United Kingdom. Now the influence from these economies, the rise of new super economies, political events around the world, and our position in the Asian time zone leave us firmly in the spotlight.
At the same time the recruitment and staffing industry is top of mind with issues such as the future of work, automation and AI, the movement of skilled workers across countries, offshoring, diversity, and the Gig Economy topics for all levels of business and politics. It is worth pausing and considering what are the influences and potential influences on the local recruitment and staffing industry.
The USA powers on
Despite what the main stream media would have us believe, business in the USA seems lightly touched by political action. The economy is booming, many sectors have a talent shortage, the Visa systems continue to operate, and the recruitment industry is going from strength to strength. The domestic market seems so strong that few companies are considering international expansion – there are lower risk and more profitable opportunities in the local market.
However, the major influence of HR and procurement practices or larger corporates does influence us all. The trends in staffing models and procurement influence are felt globally. Less obvious is the HRtech influence – there is a lot of excitement and a huge investment but to date that investment appears to be delivering an evolution of tools and techniques rather than game changing innovations.
For local business owners want to know what the current state of the recruitment industry is, and what’s likely to be an impact on their business in the future, the USA is where you concentrate.
Many recruitment businesses in the UK have an international view and operate across borders. Combined with the massive flow of resources throughout the European countries the advent of Brexit is a real and unsettling influence.
This is an impact on all agencies. If you are located in the UK and operating domestically, you will still be influenced by changes to the way you can access talent. If you are located in the UK and operate in continental Europe then the business operations for operating across borders is uncertain, and again access to talent is likely to change.
The form that Brexit may take, the changes that might be implemented and the timeframe of those changes are uncertain. So, short term there is a continuing focus on staying compliant with the European laws and operating efficiently. That brings regulatory changes like GDPR, the European Union’s General Data Protection Regulation to the front. It is in a changing regulatory environment.
Even companies in Australia can be caught up in GDPR “Australian businesses should determine whether they need to comply with the GDPR and if so, take steps now to ensure their personal data handling practices comply with the GDPR” by 25th May 2018.
It seems the rate of investment from the UK into countries outside Europe, especially the United States, is on the rise. This could be a defensive investment strategy away from Europe or could be simply investing into the largest and hottest market.
Brexit and Australia
Will a business owner in Australia be able to take advantage of what’s potentially coming? I think the answer is a resounding yes. There are two areas that appear to be contenders for improved relations and improved business between Australia and the UK. The first is a Free Trade Agreement. When the Brexit timetable is known there appears to be little stopping Australia quickly signing a Free Trade Agreement with the UK for the easier movement of goods and services between the countries. What appears impossible under the EU becomes so much easier between Commonwealth friends. Any improvement in trade is always good for the recruitment industry.
The second is the rules allowing easier transfer of human capital skills between countries. It was only a few decades ago that professionals and trades in our countries were able to reasonably easily work in their profession in the other country. Admittedly the world has become more complex, but recognition of professional skills between the countries would increase the flow of resources to areas of skill shortages. The need for expensive and bureaucratic bridging courses or waiting periods can be broken down.
In the medium term, I expect even more investment in Australian by UK recruitment agencies than we have now, and a rise in investment by Australian recruitment agencies into the UK.
We hope that this increased attention on the Australian industry generates focus and interest from Private Equity organisations. Until now Australia has missed out on broad interest from PE firms and the lack of this “pull” factor impacts the local industry. The Australian recruitment industry would benefit from the clear investment strategies of the PE firms and would energise the strategies of the emerging recruitment agencies.
Japan a major influence
Amongst the Asian markets, Japan is the big player. The Japanese recruitment industry is larger than the UK and has a strong list of well-funded strong entities. Current economic circumstances favor these companies extending out of the weakening domestic market and building international businesses. While some have restricted that expansion to the Asian region, many are also pushing into western countries. Australia is a favored destination.
The recent impact of Japan on the Australian recruitment industry is significant. Billions of dollars of revenue have been sold to Japanese companies over the past few years, with the acquisition of companies such as Programmed and Skilled, Chandler Macleod, Peoplebank, Bluefin, Clicks and Hoban. The level of interest does not seem to be slowing.
However, there are limited Australian recruitment agencies that meet the buying criteria of an overseas entity.
Sometimes it is difficult for the owners of recruitment agencies that are quite profitable and strong to understand how an external party might view them and the risk assessment and the criteria that an overseas buyer might require. Only a small percentage of the local companies meet the requirements that include a strong level of corporatisation, sustainable revenue and a strong management team.
Often an investment is for less than 100 per cent of the equity and so the acquisition is not an exit strategy. Owners need to have a medium-term view of what they’re going to be able to achieve, the growth they’re going to be able to achieve and how the two parties can add value to each other.
Emerging recruitment industry in Asia
The economic growth of India and China is well documented. These billion-person countries are economic stars.
The recruitment industries in China and India are rising off a low base. The balance of employment protections in an emerging economy and a flexible workforce will be interesting to watch. Already both countries, and the more mature markets of Singapore and Hong Kong, are creating world class entities that are exploring growth outside their domestic markets. This is not a surprise when the growth of other industry sectors such as India’s IT services are considered. We are most likely just at the start of another global wave.
Owners of recruitment agencies need to be aware of the international influences. Travelling and attending overseas conferences will start to provide an understanding and a broader perspective.
First published in The Global Recruiter Australia New Zealand Issue 2018