IT recruitment sector folds in on itself

You could be forgiven for thinking the downturn is taking its toll on the recruitment sector.

With tens of thousands of IT jobs lost over the past few months, recruitment specialists are gearing up for a wave of mergers and acquisitions. Indeed, IT recruitment trade association ATSCo is forecasting a rush for consolidation in the sector.

Delegates attending an ATSCo meeting yesterday were told the time is right for those - including venture capitalists - on the lookout for bargain priced firms.

It's hardly surprising bad news, considering the litany of job cuts, dot-com closures and mega multinational mergers making headlines over the past few months.

Yet according to ATSCo, consolidation is a sign of a thriving, if slightly cautious market. Apparently it doesn't spell gloom, for three main reasons.

First, it points out the majority of the UK workforce is still made up of permanent employees. More flexible working - should it not be severely dented by things like IR35 - should mean a greater role for recruiters.

Then there's the move toward outsourcing, and guess what, companies tend to like recruitment firms taking care of staff.

And finally, demographics looms. Despite large scale job cuts, the skills crisis is set to endure as the proportion of skilled IT workers in the 25 to 45-year-old age bracket drops.

So to take the industry line, consolidation will mean fewer IT recruitment companies, but those that do survive will be stronger creatures, able to offer improved services and weather economic storms.

Smaller groups will disappear, but relatively healthy ones can hope to be bought up rather than go bust.

But let's not tow the line completely. Consolidation will also mean less competition and diversity. It could also mean less revenue for the sector. And it could mean less clout for an organisation like ATSCo when lobbying the government on issues like IR35.

As previous cases have shown, consolidation is hard work. Acquisitions can break a company, and mergers are not always passed.

IT recruiters have spun consolidation as a vote of confidence in the industry. It's not. It's a mostly sensible survival tactic, and it's a sign of the times.