| Key Note defines the employment agency industry as businesses that are recognisably operating as employment agencies, nursing and medical agencies, nannies' agencies and other personnel consultants.
According to the industry association, the Federation of Recruitment and Employment Services (FRES), the employment agency industry achieved sales of £16bn in 1998, of which 92.8% came from temporary (temp) business and 7.2% from permanent recruitment. This compares with £14.1bn for 1997.
The industry has enjoyed a considerable increase in turnover since the mid-1990s. As a result, a large number of new businesses have been attracted into it, which has created a competitive sector.
Large multinationals and other major groups dominate the market and are continuing to grow organically and by acquisition. Nevertheless, small, even single-office businesses can achieve healthy results because clients buy on the individual service that they receive rather than the size of the agency.
Employment regulation affecting agencies has been lenient in the past, but during the 1990s it has become far stricter. As a result, agencies will be hard-pressed to keep up, and face ruinous penalties for 'inadvertant' breaches of new legislation.
Legislation permitting, there is ample room for the industry to grow long term. In the short term, growth is likely to be slower than in recent years. After growth averaging 28.4% per annum in the period from 1996 to 1998, it seems likely that 1999 will increase by 5% year-on-year to £16.8bn, and market value is expected fall to £16.5bn in 2002.
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