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How does the budget affect recruitment agencies?

What impact will Wednesday’s budget have on recruiters? The REC gave a detailed response on Thursday, confirming their previous statement that the UK jobs market will recover very slowly.

They believe that not enough has been done to lift barriers to job creation. Employment legislation is still too complex and business taxation coupled with the 1% NICs increase is putting SMEs off increasing their workforce.

They reminded us that 85% of recruitment agencies are classed as SMEs and the majority of them will have had recent cash flow concerns.

The reduction in business rates and the announcement that more business loans would be made available through RBS and Lloyds are both seen as important and helpful measures for SMEs as a whole.

The 16 - 24 age bracket will benefit from an extension of the Jobs Guarantee which will now operate until March 2012. The scheme ensures that any young person who has been unemployed for 6 months will be offered either a job or job related training.

However the REC is unsure of whether the proffered jobs will give people the necessary skills to compete in the job market. There is also no guarantee that the job will become permanent.

The REC has set up a Youth Employment Taskforce to tackle support for young jobseekers and it will report after the upcoming general election.

Public sector recruiters may suffer as a result of expenditure cuts but the REC thinks that a more efficient approach should be taken with flexible staffing arrangements as a key element.

The Chancellor's budget speech also included proposals to cut back on the amount of management consultants used in the public sector. This will save money but there will still on occasion be the need for specialist advice and Scott Pendry, Policy Advisor to the Interim Management Association, said that the use of interim managers could well prove to be the most cost effective solution.

Elsewhere, the chief executive of Extrastaff, a driving and industrial recruiter believes that the budget contained nothing to help recruiters. He also highlighted the proposed hike in NICs as a problem and pointed out that whereas the UK used to reasonably free of red tape, it now ranks 84th in the world.

A senior tax manager at Grant Thornton said that although the government had introduced new measures to help the young unemployed, they did not go far enough.

Consultants and freelancers were also largely ignored according to Martin Hesketh, the MD of contractor accountant Brookson. The only benefit they gained from the budget was an extension of the time to pay scheme.

Entrepreneur recruiters, however, are set to benefit from the decision to double their CGT relief. A reward partner at PwC said that both companies and individuals alike should welcome the decision not to increase CGT rates as this will boost employee share plans.

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